Crude oil price retreats by more than 2% in European morning mainly due to profit-taking and correction in stock markets. FTSE 100 Index plunged 2.3% as the UK may lose its AAA credit rating. Both the DAX and CAC 40 Indices follow the suit and slid more than 1.5%.
In light of the surging debt burden, S&P has downgraded UK's economic outlook to 'negative' from 'stable'. The agency said that, even after assuming fiscal tightening, the net general government debt burden could reach 100% of GDP and the situation will persist for some time. Britain will be the 5th western EU country, following Ireland, Greece, Portugal and Span, to lose its rating amid the current recession. The pound slumps to 1.5514, almost 2% from inter-day high of 1.5815, against the dollar after the news.
Investors temporarily trim investment in risky assets after the Fed stated in the FOMC minutes that members saw significant downside risks to the economy and the global financial system. The US leading indicator, which historically troughs 6 months before the US steps out from recession, is expected to have gained +1% in April as driven by better consumer confidence, rallies in stock markets and stabilization in jobless claims data. If the result came in as market expected, it would be the first increase in almost a year and the sharpest gain in 4 years.
Natural gas slipped 1.6% to 3.906 as led by decline in crude oil price. The US Energy Department will report gas storage number which is anticipated to have gained 93 bcf for the week ended May 13, compared with 5-year average of 90 bcf.
Despite decline in sterling, USD remains weak and this well-supports gold to stay above 940 level. Silver price also continues to trade steadily after rising 1.1% to close at 14.28 Wednesday. Gold/silver price ratio has narrowed to 65 recently from the peak of 84 in October 2008 as more investors view silver a relatively cheaper alternative to gold.
Platinum price remains trading sideways while other precious metals gain on dollar's weakness. We believe platinum price will continue to trade within the range of 1071 and 1252. In fact, at current price level, platinum price is fairly priced. Although investment demand has surged rapidly and China's jewelry demand has improved remarkably, demand for both auto-catalysts and other industrial applications, totally contributes 70% of total platinum demand, remain weak. Upside risk is the listing of new ETFs in the US.