Sentiment Dampened on US Data, Fiscal Cliff

 
on November 16 2012 6:31 AM

Market sentiment dampened amid concerns over fiscal cliff as Democrats and Republicans appeared to fail to compromise on measures to deal with the problem. US’s job data disappointed as impacts of hurricane Sandy became evident. These issues upstaged reemergence of geopolitical tensions in the Middle East with 3 Israelis killed in Gaza by bombing. Wall Street declined with the DJIA and S&P 500 indices losing -0.23% and -0.16% respectively. In the commodity sector, the front-month contract for WTI crude slipped -1.01% while the equivalent Brent crude contract retreated -1.46%. Gold plunged to a 6-day low of 1704.5 before settling at 1713.8, down -0.94%.

US’ President Barack Obama and the Republicans remained divided over ways to resolve fiscal cliff. Obama blamed the Republicans for objection to his proposal on tax hike and predicted if they continued like that, “middle-class families are all going to end up having a big tax hike…That’s going to be a pretty rude shock for them, and I suspect will have a big impact on the holiday shopping season.” A number of Fed members spoke yesterday. Fed Chairman Ben Bernanke stated that “it is encouraging…..that we are seeing signs of improvement in the housing market”. Concerning the credit standards, Bernanke said that “overly tight lending standards may now be preventing credit worthy borrowers from buying homes”. San Francisco Fed President Williams said the Fed would “need to continue our purchases of mortgage-backed securities and longer-term Treasury securities past the end of this year and likely well into the second half of next year” while Richmond Fed President Lacker maintained his opposition stance on the current easing measures.

Impacts of Hurricane Sandy began to reflect on economic data. Initial jobless claims climbed +78K to 429K in the week ended November 10, up from 361K in the prior week and marked the higher level since April 2011. The weekly increase was due to the attack of Hurricane Sandy and was the second largest figure following the +96K addition caused by Hurricane Katrina in 2005. Continuing claims rose +171K to 3334K in the week ended November 3. The Philly Fed slipped -16.4 points to -17.7 in November as a third of respondents reported that activities had been reduced for 3 or more days as a result of the hurricane. Yet, data from the New York city has not yet shown any impact with the Empire state manufacturing index gaining +0.94 points to -5.22 in November. This was above market expectations of a dip to -7.2.

The DOE/EIA reported that total crude oil and petroleum products stocks slipped -4.73 mmb to 1094.25 mmb in the week ended November 9. Crude stockpile increased +1.09 mmb to 375.94 mmb as stockpiles rose in all 5 PADDs. Cushing stock added +0.72 mmb to 43.68 mmb. Utilization rate was up +0.6% to 86.0%.

Gasoline inventory slipped -0.44 mmb to 201.94 mmb as demand rose +7.23% to 8.91M bpd. Production added +2.37% to 9.10M bpd while imports soared +121.48% to 0.60M bpd. Distillate inventory plunged -2.54 mmb to 115.52 mmb as demand rose 14.4% to 4.11M bpd. Imports climbed +263.6% to 0.20M bpd while production gained +0.20% to 4.57M bpd during the week.

Oil and Gold Reports contributed by Oil N' Gold

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