Financial markets rebounded sharply yesterday as investors were thrilled by stronger-than-expected US housing data and Germany's confidence indices. Wall Street jumped with DJIA and S&P 500 gaining +2.87% and +2.98% respectively. In the commodity sector, the front-month contract for WTI crude oil surged to 97.45, the highest level in 4 days, before settling at 97.22, up +3.56%, while the Brent crude contract also jumped to a 4-day high of 107.27 before ending the day at 106.73, up +2.98%. Gold also rose a tad as the US dollar weakened on increased risk appetite.
Despite the overhang of sovereign debt problems in the Eurozone, investors took a relief in the short-term as the US economic data continued to surprise to the upside. Housing starts surprisingly climbed to 685K in November from 628K a month ago. The market had anticipated a milder improvement to 630K. Building permits rose to 681K in November from 653K in October. This was in contrast with the consensus of a drop to 635K. Sentiment in Germany unexpectedly improved in December. The IFO business climate index rose to 107.2 in December from 106.6 a month ago. The market had anticipated a dip to 106. The 'current assessment' index stayed flat at 116.7, compared with consensus of a drop to 106.
Macroeconomic data may further boost market sentiment as US existing home sales probably rose +2.41% m/m to 5.09M in November. The BOE will release the minutes for the December meeting today. It would likely unveil that policymakers voted unanimously to leave interest rates and the size of asset purchases unchanged.
The DOE/EIA will report the weekly US inventory data. The industry-sponsored API estimated that crude oil inventory fell -0.33 mmb in the week ended December 16. Gasoline and distillate stockpiles declined -0.39 mmb and -2.78 mmb respectively. The market forecast that crude inventory probably dropped -2.13 mmb. For fuels, gasoline stock might have ained +0.15 mmb while that for distillate slipped -0.75 mmb.
|Weekly change in inventory as of 16/12/11||Change||Consensus||Previous|
|Crude oil||-1.25 mmb||+1.34 mmb|
|Gasoline||+0.88 mmb||+5.15 mmb|
|Distillate||+1.15 mmb||+2.53 mmb|
Comparison between API and EIA reports:
|API (Dec 16)||EIA (Dec 16)|
|Actual||Inventory||Previous||Forecast (using API's inventory level)||Inventory|
|Crude oil||+0.46 mmb||334.60 mmb||+0.46 mmb||+8.36mmb||339mmb|
|Gasoline||-0.39 mmb||215.35 mmb||-0.01 mmb|
|Distillate||-2.78 mmb||142.38 mmb||+1.24mmb||+6.50 mmb||139 mmb|
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