Financial markets steadied as investors awaited German Constitutional Court's ruling on the ESM/fiscal compact and the People's Bank of China reported RMB 704B of new loans in August, up from a disappointing RMB 540B in July. Positive comments from the Troika after meeting with Portuguese and Greek officials also helped sustain sentiment. News reports said that Spain has proposed a 3-step plan towards a Eurozone fiscal union. In the US, Moody's warned of credit downgrade if no progress of deficit reduction is seen. In the commodity sector, crude oil prices climbed modestly with the front-month contract for WTI crude added +0.65% while the Brent crude contract rose +0.51%. Gains were limited as the OPEC warned of high prices and increase in output.
The German Constitutional Court will decide on Wednesday whether it would allow Germany to join the ESM, a fund worth of 500B euro and is for bailout out debt-ridden countries in the Eurozone. Opponents of Germany's participation in the ESM conservative legislator Peter Gauweiler, a group called "Europe Needs More Democracy" and Germany's Left Party. The court would decide whether to issue a temporary order that would prevent rectification of the ESM. The order would last until the court announces its final decision on the full case, probably early next year. After meeting with Greece's Prime Minister, the ECB issued a statement, saying that "both parties agreed that Greece has already taken significant steps towards budgetary consolidation and economic modernization but that major challenges remain". The Prime Minister assured the ECB delegation of his and his government's commitment to getting the adjustment program back on track and continuing the necessary reforms for Greece to regain competitiveness and put its economy and public finances on a solid footing". In Portugal, a troika delegation also released a statement after his visit saying that "overall, this review confirms that the program is making progress, albeit against strong headwinds".
In China, Premier Wen Jiabao attempted comfort investors and assured that the government would strive to boost economic. At the World Economic Forum, he stated that the government would "give greater priority to stabilizing growth...We have full confidence that the target for China's economic growth this year will be met". He also noted that there remained RMB 100B in the stabilization fund which would be deployed if needed.
The industry-sponsored API estimated that US crude inventory added +0.22 mmb in the week ended September 7. For fuel products, gasoline stock fell -4.2 mmb while distillate dropped +2.5 mmb. The DOE/EIA probably reports that crude inventory fell -2.6 mmb during the week, while gasoline and distillate dropped -1.6 mmb and -0.2 mmb respectively. Concerning the oil demand outlook, the OPEC, in contrast with the US' view of rising oil demand in the future, left its forecast unchanged at 810K bpd in 2013 and reiterated that the actual demand could be -20% lower than this estimate. The cartel also indicated concerns over recent oil prices, saying an increase in production is needed to bring down prices.