The Asian market is relatively quiet today as China, Hong Kong and South Korea are on holiday. Yet, investors are disappointed by weakness in Chinese and Japanese economic data. Moreover, the situation in Spain remains uncertain, particularly the when the debt-ridden country would formally request funding from external sectors. In the commodity sector, the front-month contract for WTI crude oil slipped slightly after the 2-day rebound last week while the Brent crude contract also retreated in the Asian session. Gold dropped for the second consecutive day but remained supported above 1750.
The official Chinese manufacturing PMI climbed higher to 49.8 in September from 49.2 a month ago. Despite the mild improvement, a reading below 50 signaled that the manufacturing sector remained in contractionary basis. Over the weekend, the data compiled by HSBC and Markit was revised higher to 47.9 from the flash reading of 47.6. Indeed, the September reading should be a seasonally strong one. The disappointment coming from the 2 sets of data heightened concerns about the outlook of China’s economic growth. Earlier last week, the PBOC reaffirmed that it would "fine tune" the monetary policy to ensure achievement of the annual growth target. However, liquidity injection to the market through reverse repos over the past weeks was obviously insufficient to bolster the slowing economy. The market is hoping for more substantial measures such as RRR reduction and rate cut.
In Japan, the Tankan survey showed that the countries’ manufacturers have turned more pessimistic as weakness in exports delays recovery. According to the BOJ, the sentiment index for large manufacturers slipped to -3 in 3Q12 from -1 in the prior quarter. Confidence of small manufacturers dropped for a 4th consecutive quarter to -14 in 3Q12, compared with the second quarter’s reading of -12.On "all industries" basis, sentiment weakened in all scales of industries as strong Japanese yen dampened exports while anti-Japanese sentiment in China due to the Diaoyu Islands dispute pressured Chinese demand on Japanese goods with the biggest sufferer the automobile sector.
Commitments of Traders:
Speculators were mixed towards the energy complex in the week ended September 25. Net length for crude oil futures fell-35 854 contracts to 231 297 while the net short for natural gas futures climbed +3 850 contracts to 93 543. Net length for heating oil added +588 contracts to 15 565 that for gasoline added +3 844 contracts to 74 297.
Speculators were also bullish towards precious metals during the week. Net length for gold futures increased +12 781 contracts to 203 896 while that for silver gained +1 455 contracts to 34 010. For PGMs, net length for platinum gained +2 589 contracts to 38 723 while that for palladium rose +1 824 contracts to 11 918.
Oil and Gold Reports contributed by Oil N' Gold