Crude oil price extends recent rally to as high as 60.99 in European morning as further driven by advance in stock markets and forecast of inventory withdrawal last week.
In Asia, the MSCI Asia Pacific Index climbed 2.5% while Japan's Nikkei 225 STcok Average surged 2.8% to close at 9290 as investors become more optimistic on UK banks amid reduction in borrowing costs (LIBOR has fallen to the lowest in 2 months if 0.795% yesterday). Several US banks, including Goldman Sachs, JP Morgan Chase and Morgan Stanley sought to repay the combined $45B they received from the Government in October 2008. This indicated their confidence in the business and economic outlook.
In Europe, UK's FTSE 100 Index rose to the highest since January 8 as led by financial stocks. In Germany, DAX Index jumped 2.4% while France's CAC 40 Index added 1.5% after the release of better-than-expected sentiment data. In May, the ZEW economic sentiment improved to 31.1 from 13 in April. The reading came in higher than consensus, suggesting the market have turned more optimistic about the nation's economy and believed the sharp contractions in industrial and business activities have eased. Concerning the 16-nation region as a whole, the gauge also rose to 28.5 in May, compared with analysts' forecast of 15 and 11.8 in April.
Economists anticipate the US Energy Department will report another week of crude inventory decline tomorrow. According to Bloomberg survey, crude oil stockpiles probably dropped 1.75 mmb for the week ended May 15 as led by decline in oil imports. Moreover, refinery operations might have risen 0.4% to 84.1% during the week as the peak driving season approaches.
Gasoline demand is strongly related to household income whose outlook is rather dim this year as unemployment situation in the US remains poor. The chart below hints gasoline demand will decline this summer from the same period last year, a result contradicting IEA's forecast of +0.38M bpd growth in demand in 3Q09 from 3Q08.
Gold price changes little after falling to 921 yesterday. The UK reported higher-than-expected moderation in inflation in April. CPI eased to +2.3% yoy from +2.9% in March while the reading stayed at 0.2% on monthly basis. The decline in price pressure was driven by lower electricity bills and food prices. Retail price index also dropped to -1.2% yoy and +0.1% mom in April from respective -0.4% and 0% in the previous month.
The dollar index plunged to as low as 82.03 today as investors moved to risky assets such as stocks and higher-yield currencies. Against Australian dollar and New Zealand dollar, the USD slips 1.3% and 1.7% to 0.776 and 0.605 respectively. The pound has shown significantly recovery against the dollar with the currency pair (GBPUSD) rising to 1.548, the highest level year-to-date.