Wall Street began the day with a soft as driven by weakness in Asian and European bourses. However, prices rebounded as economic data released appeared stronger than expected. DJIA and S&P 500 Indices ended the day flat. In the commodity sector, crude oil price tumbled as Chicago PMI missed consensus. Slowdown in the manufacturing sector could dampen oil demand. Moreover, surprising increase in crude inventory also triggered the selloff. Gold rallied to a 2-month high after a few days of consolidation. Surge in Treasuries helped support the yellow metal. Today in Asia, stocks and oil prices were lifted higher as China's PMI accelerated in August.

The S&P/Case-Shiller Index showed that home prices in 20 US cities rose +4.2% m/m in July, compared with consensus of +3.5%. However, the reading might have been distorted by tax credits in April and May as the index is a 3-month average. Investors should remain cautious as readings in coming months may fall sharply. The Conference Board's consumer confidence improved more-than-expected to 53.5 in August from 50.4 a month ago. However, the labor assessments deteriorated. Fewer people thought that jobs are plentiful (3.8% vs 4.4%) and more believed jobs are hard to get (45.7 vs. 45.1). the report indicates consumers remained worried about the employment condition in the US.

Chicago PMI plunged to 56.7, the lowest level since November 2009, in August from 62.3 in July. The market had anticipated a milder dip to 57.5. The disappointment here may affect the ISM manufacturing data to be released today.

The front-month contract for WTI crude oil slumped to as low as 71.53 before recovering to 71.92, down -3.72% at close. In August, the contract tumbled -8.90% amid conerns over global economic slowdown.

API's report on oil inventory added to worries. Crude oil inventory surged +4.70 mmb to 361.46 mmb in the week ended August 27. Although stockpiles for both gasoline and distillate dropped, investors unsettled about the huge crude inventory which will not be absorbed by sluggish demand in the medium-term. The US Energy Department will probably say crude and distillate inventories added +1.55 mmb and +1.00mmb respectively, while gasoline stockpile slipped -0.38 mmb

Today in Asia, sentiment was boosted after China's PMI climbed to 51.7 in August from 51.2 a month ago. A separate report by HSBC also showed that PMI rose to 51.9 from 49.4. The US today will also release its ISM manufacturing index which probably has slid to 53 in August from 55.5 in July.

Weekly change in inventory as of 27/08/10 ChangeMarket Expectation Previous
Crude oil  +1.55 mmb+4.11 mmb
Gasoline  -0.38 mmb+2.27 mmb
Distillate  +1.00 mmb+1.76 mmb

Comparison between API and EIA reports:

API (Aug 27)

EIA (Aug 27)

Forecast (using API's inventory level)Inventory
Crude oil+4.70 mmb361.46 mmb-1.85 mmb

+3.18 mmb

361 mmb
Gasoline-0.90 mmb225.33 mmb+1.88 mmb
-0.29 mmb225 mmb
Distillate-1.80 mmb167.80 mmb+0.69 mmb
-8.17 mmb168 mmb

API collects stockpile information on a voluntary basis from operators of refineries, 76% of the time, using data in the past 4 years.

Source: Bloomberg, API, EIA