Oil prices remained under pressure in European session. WTI oil broke briefly below 76 at one point. The benchmark has turned weak after the 80 level was breached. Brent crude held above 100 but support is wavering. Gold strengthened with price soaring to the highest level since September 23. The contrary price movement of gold and euro indicated vulnerable market sentiment and the cause of risk aversion is sovereign debt crisis in the Eurozone.
The dramatic economic downturn triggered downward revision in growth forecasts. Goldman Sachs trimmed its growth estimates to +3.8% this year and +3.5% for 2012, down from previous projections of +3.9% and +4.2%. The investment bank expected Germany and France will face mild recession while peripheral economies will suffer deeper downturn. The ECB will be meeting on Thursday. It's hoped that the central bank will announced easing measures including re-launch of the covered bond purchase program and reintroduction of the 12-month loans for the region's banks. Speculations of a rate cut of -25 bps have also been heightening.
While leaving the cash rate unchanged at 4.75%, the RBA turned more dovish at the October meeting, signaling a possible rate cut in coming months. Concerning the global economy, policymakers acknowledged that 'conditions in global financial markets have continued to be very unsettled', 'recent data suggest a continuing period of soft economic conditions in both Europe and the United States' and 'the uncertainty and financial volatility have reduced confidence, which could result in more cautious behavior by firms and households in major countries'. On inflation, 'recently revised data show a pick-up to date in the underlying pace of price rises that was less sharp than initially indicated'. Moreover, it's also added in the statement that 'improved inflation outlook would increase the scope for monetary policy to provide some support to demand, should that prove necessary'. This paved the way for monetary easing in coming months.
As far as macroeconomic data is concerned, Eurozone's PPI probably slipped -0.2% m/m in August, easing from +0.5% in the prior month. On annual basis, the reading also moderated to +5.8% from +6.1%. In the US, factory orders might have contracted -0.1% in August from +2.4% in July. Fed Chairman Ben Bernanke will testify on the economic outlook before the Joint Economic Committee.