Market sentiment remained strong as the week began in Asia, as the G-20 countries pledged after the meeting over the weekend to take further steps to resolve European debt problems. Shares in Asia advanced with the MSCI Asia Pacific index gaining more than +1.0%. In the commodity sector, the WTI contract for December delivery climbed higher following last week's rally, while the equivalent Brent crude contract also remained firm at the highest level in more than 1 month. Gold continued to trade choppily below 1700.
Finance leaders announced after the G-20 meeting that European policymakers will have an 'emergency summit' next weekend for formulating a durable and sustainable solution to the sovereign debt crisis in the 17-nation region. As stated in the communiqué, the world economy is facing 'heightened tensions and significant downside risks' and policymakers are expected to 'decisively address the current challenges through a comprehensive plan'. While no details of the plan were given, it's anticipated to include a recapitalization of European banks, write-downs of Greek debt to as much as 50% and further expansion of the EFSF. Despite buoyant market sentiment, we advise caution on Eurozone's outlook as implementation of the measures is the key.
Apart from the Eurozone, China's economic growth is also under the spotlight. As the second largest economy in the world, China's GDP probably expanded +9.2% in 3Q11, eased from+9.5% in the prior quarter. The key challenge for Chinese growth is global economic slowdown as well as the elevated inflation domestically. Concerning currency, it appears unlikely that the country will adjust the pace of RMB appreciation despite the US senate's measure. Premier Wen Jiabao reiterated a 'basically stable exchange rate'.
Commitments of Traders:
With the exception of natural gas, speculators were bullish on the energy complex in the week ended October 11. Net length for crude oil futures climbed +12 897 contracts to 121 061. Heating oil futures reverted to net length of +2 094 contracts during the week while that for gasoline futures rose +6 255 contracts to 44 957. Net short for natural gas futures increased to 172 097 contracts.
With the exception of platinum, speculators were bullish on the precious metal complex. Net length for gold futures climbed +1 346 contracts to 134 502 while that for silver added +48 contracts to11 948. For PGMs, net lengths for platinum dipped -736 contracts to 19 677 while that for palladium futures gained +759 contracts to 6 953.