Worries over the sovereign debt crisis in the Eurozone eased temporarily after the successful Spanish auction. Reports also showed that Ireland has passed its latest IMF/EU assessment. In Greece, there have been speculations that a PSI resolution would be reached soon. Market sentiment was also lifted by better-than-expected US jobless claims. Wall Street climbed higher with DJIA and S&P 500 gaining +0.37% and +0.49% respectively. In the commodity sector, oil slipped as US fuel demand reportedly dropped last week. Moreover, it appeared that the EU has not yet reached agreement on the Iran embargo.
Sale of 10-year Spanish bonds attracted over 3B euro yesterday. Moreover bond yields fell to 5.403%, down more than -150 bps from an auction of the same bonds in November. Meanwhile, a French bond auction also drew strong demand despite S&P's downgrade of the country's triple A credit rating.
It's reported that the progress of Ireland's fiscal consolidation has been ahead of expectations. It has already cut the deficits back below 10% of GDP and was as a result granted more loans by the EU/IMF/ECB troika. However, a concern is that Ireland's economic growth this year may halve the original forecast, making it harder to reach the year-end fiscal target of 8.6% of GDP. Concerning Greece, another Eurozone country that was bailed out, the focus is on the PSI deal. Finance minister Evangelos Venizelos said the discussion has entered the final stage.
In the US, economic data delivered both upside and downside surprises. Initial jobless claims dropped -50K to 352K (consensus: 383K) in the week ended January 14, sending the 4-week average -4K lower to 379K, the lowest level since June 2008. Housing data were mixed. While building permits came inline with expectations and stayed at 0.68M in December, housing starts fell to 0.66M from 0.69M in November. Philly Fed survey surprisingly fell -3 points to 7.3 in January, compared with consensus of an improvement to 11.
It was the rise in gasoline inventory that pressured oil prices yesterday. According to the DOE/EIA weekly report, total crude oil and petroleum products stocks fell -2.06 mmb to 1051.69 mmb in the week ended January 13. Crude stockpile dropped -3.44 mmb to 331.21 mmb as stocks only gained in PADD 3. Cushing stock slipped -83 mmb to 28.27 mmb. Utilization rate decreased +1.90% to 83.7%. Gasoline inventory gained +3.72 mmb to 227.52 mmb as demand dropped for a third consecutive week, by -2.24%, to 8.00M bpd. Production climbed +0.56% to 8.79M bpd while imports rose +24.55% to 0.55M bpd. Distillate inventory added +0.44 mmb to 148.00 mmb as demand gained for the first time in 9 weeks, by +10.86% to 3.64M bpd. Imports slipped -34.36% to 0.22M bpd while production plunged -5.93% to 4.48M bpd during the week.
Weekly change in inventory as of 13/01/11
Comparison between API and EIA reports:
API (Jan 13)
EIA (Jan 13)
Forecast (using API's inventory level)
API collects stockpile information on a voluntary basis from operators of refineries. Data from the API and DOE have moved in the same direction 71% of the time over the past 52 weeks
Source: Bloomberg, API, EIA