Despite weakness in Asian session, crude oil price recovered in NY session amid rebound in stock market and renewed selling in USD. The October contract slid -0.6% to 68.86. Concerning others in the energy complex, heating oil stayed flat at 1.74 while RBOB gasoline lost -1% to 1.74. Natural gas rebound +11% to 3.297 after falling -9% last Friday. Gas price should continue to trade with high volatility.
US stock markets opened lower following a weak Asian session Monday. However, buying interest emerged again and S&P 500 climbed +0.6% to settle at 1049.34, the highest level in almost a year. Dow Jones Industrial Average also gained +0.2% to 9627. Worries about US-China trade protectionism mitigated after US President Obama said ‘we are not going to see a trade war’.
Today in Asia, equity markets have little change with the MSCI Asia Pacific Index staying flat while Japan’s Nikkei 225 Stock Average adding +0.1%. Crude oil price trades narrowly around 68.5.
USD initially rebounded but was then under pressure again. The greenback lost -0.6% and set another 9-month low against the euro after the EU’s comment European’s economy is coming out of recession:’ The improved economic outlook reflects external conditions being increasingly favourable. Recent data for trade and industrial production, as well as business and consumer confidence, are generally encouraging. The resilient private and public consumption and advancements in the inventory cycle will also support growth in Europe’. The Commission anticipated the region will return to growth in the third quarter with GDP of +0.2% and +0.1% in 3Q09 and 4Q09 respectively.
It’s hard to tell with a day’s data whether risk appetite has returned. In fact, both AUD and CAD dropped against the dollar yesterday amid decline in metal prices.
Gold rebounded after falling to as low as 994.4 yesterday. The yellow metal managed to close above 1000 for a second day. However the US-China trade dispute evolve will have impact on gold’s outlook. If the tension between the 2 large trading nations is escalates and the issue is translated into a full-blown trade war, demand for safe investments will drive capitals to USD and hence is negative for gold. However, we believe the possibility for this is low. First, China’s tire export to the US is only around 0.08% of its total exports, it does not have real impact to the nation’s economy after imposition of tariffs. The Chinese government will not want to lose US as its big market.
Platinum price has been trading soft since beginning of the week after strong rally last week. However, momentum remains strong and recent rise should resume after consolidation. Labor actions in South Africa have been resolved for now as the National Union of Mineworkers had agreed to a 1 year wage deal with Anglo Platinum. We are impressed as platinum stayed firm even after the issue has been settled. This was probably due to improved confidence in global auto market.
