Crude oil price extends further gain and is currently trading at 67.4 in European morning. Strong momentum in the stock markets despite mixed economic indicator. The black gold will very likely record the second consecutive weekly gain.

In the Eurozone, manufacturing PMI rose to 46 in July, compared with market expectation of 43.6 and 42.6 in the prior month. Services PMI also improved to 45.6, better than consensus of 45.3 and 44.7 in June. While reading below 50 indicates contraction, the improvement suggested the pace gas been moderated.

On the other hand, UK's GDP shrank -0.8% qoq in 2Q09, much worse than analysts' forecast of -0.3%. 1Q09 GDP was also revised down to -2.4%. Looking into details, construction output plunged -2.2% qoq and -14.7% yoy, the largest decline since 1948, which services and finance slid -0.7% qoq and -4.4% yoy. The disappointing result spurs speculations on BOE's next step to revive economy.

On Wednesday, BOE released the minutes for July's meeting. It's shown that policymakers voted unanimously to keep the policy rate unchanged at 0.5% and maintain the 125B pound asset buying program the same. However, little clues were found on whether the central bank would go further after the existing QE measures complete. Analysts' forecasts were diverged. While some believed the BOE would wait for the economic forecasts in August before making decisions, others anticipated QE in the UK would end by the end of July. Our view is that the BOE should announced further QE policies at the meeting in August though it can be extension of the existing asset buying program or other new measures. We believe the current economic conditions do not allow the central bank to stand aside.

UK's FTSE 100 Index moves higher by +0.5% despite the result. Germany's DAX and France' CAC 40 also climbs +0.5% in European morning.

Natural gas storage rose 66 bcf to 2952 in the week ended July 17. Compared with 5-year average, inventory is +18.4% higher. However, the trend has been coming down from the peak in late-April/early May. During that time, storage was almost +23% higher than 5-year average. It's highly likely that storage will exceed 3000 bcf next week, which will be 1 month before the next earliest year in 2007. Price action after the report indicated investors' worry about gas' outlook. The benchmark contract slumped to as low as 3.523 from intraday high of 3.891. The gauge ended the day at 3.55, losing -6.4%.

 Gold price continues to trade below 960 despite crude oil's rally. Despite recent underperformance compared with other commodities, gold price remains relatively high. At current price level, gold is around -5% lower than all-time high while crude price is -55% below the peak of 147.27. For copper, current price level is still -38% lower than its peak in 2008.

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