Stock markets in Asia steadied on Monday but cautiousness remained as major economies will release 2Q12 GDP data this week. After China's data showed further slowdown in the world' s second largest economy last week, growth in Japan came in weaker than expected. Investors now concerned about the economic recovery in the Eurozone and particularly the likeliness that Germany would slip to recession as affected by severe contraction in some European peripheries. In the commodity sector, crude oil remained resilient with the Brent crude contract rising above 114 due to supply concerns.
Japan's economy grew only +0.3% q/q in 2Q12, well below expectations of +0.6% and +1.2% in the first quarter. The major disappointment came from weak consumer spending. Although the government has been giving subsidies on a number of green products since the earthquake last year, the impact on stimulating spending has been limited. As the positive effect of the subsidies fades, Japan's consumption outlook is expected to weaken further in coming quarters, an outlook that would hurt investors' confidence.
The Eurozone economy probably contracted -0.2% q/q in 2Q12. Although the 17-nation avoided a technical recession after a flat GDP reading in the previous quarter, the economic developments have been dismal. Several peripheral countries have indeed slipped into recession and the situation will only be worse as the government implement fiscal consolidation plans. As the biggest economy in the Eurozone, Germany's GDP probably expanded modestly by +0.1% in 2Q12. The country's economy ministry warned last week that trades have declined and business sentiment in recent months has dropped sharply. There pointed to "significant risks" to Germany's outlook. Some economists forecast that Germany's economy would contract in the third quarter from the second quarter, before deteriorating further in the fourth quarter. The global economic outlook would certainly weaken should Germany fail to support the Eurozone anymore.
Commitments of Traders:
Speculators were bullish towards the energy complex in the week ended August 7. Net length for crude oil futures gained+30 102 contracts to 204 499 while heating oil returned to net length of1 895 contracts. Net length for gasoline rose +4 057 contracts to 67959. Net short for natural gas futures fell -2 312 contracts to 73 100.
With the exception of gold, speculators were bullish towards precious metals during the week. Net length for gold futures fell -10 564 contracts to 115 500 while that for silver added +644 contracts to 13 680. For PGMs, net length for platinum increased -674 contracts to 18 955 while that for palladium climbed +448 contracts to 4 859.