Disappointments from corporate earnings announcements have limited gains in stock markets. Caterpillar, despite its mildly higher-than-expected earnings result, lowered its full-year earnings forecast. The company’s CEO stated that "as we’ve moved through the year, we have seen continued economic weakening and uncertainty". Wall Street ended the day with modest gain with the DJIA and the S&P 500 adding +0.02% and +0.04% respectively. In the commodity sector, crude oil prices plunged with the front-month contract for WTI crude oil closing below 90 for the first time since October 8 while the equivalent Brent crude contract declined for a 5th consecutive day. The Comex gold contract initially slipped a 6-wewek low 1726.3 before rebounding to 1726.3, up +0.13%, at close.
Gold’s recovery was probably driven by euro’s firmness which was driven by the victory of Spain’s governing Popular Party which unexpectedly retained control of Galicia, Prime Minister Mariano Rajoy’s home region. This would make the government easier to implement austerity measures such as tax hike. In Greece, Prime Minister Antonis Samaras expelled deputy Nikos Stavrogiannis, a lawmaker who would vote against the country's latest round of austerity measures, from the New Democracy parliamentary group.
The BOC will be meeting for discussion on monetary policy. We expect the central bank would leave the policy rate unchanged. At the same time, we would like to see if the accompanying statement would retain the rate hike rhetoric that "in light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary stimulus may become appropriate consistent with achieving the 2.0% inflation target over the medium term".
On the data flow, Australia’s conference board leading index fell -0.8% in September following a flat reading in the prior month. Canada’s retail sales probably climbed +0.3% m/m in August after gaining +0.7% a month ago. Excluding auto, retail sales might have added +0.2%, easing form +0.4% in July. In the Eurozone, consumer confidence might have added +0.1 point to -25.8 in October.
Oil and Gold Reports contributed by Oil N' Gold