Crude oil pulls back in European session in tandem with drops in stock markets. Slightly worse-than-expected consumer sentiment in the Eurozone drove investors away from higher-yield assets. Currently trading at 77.6, the February contract, to be expired tomorrow, returns to the lowest in 2 weeks after recovering briefly Monday.
ZEW economic sentiment in the Eurozone dropped to 46.4 in January (consensus: 48.2) from 48 in the prior month. The reading for Germany also slid to 47.2 (consensus: 49.8) from 50.4 in December. This 4th consecutive monthly fall was driven by concerns about large deficits in some of the countries (e.g.: Greece) in the 16-nationed region. Moreover, recent economic data in Germany is mixed, signaling the pace of growth may be slowing down.
In the UK, CPI surged +0.6% mom in December, following a +0.3% increase a month ago. The rise doubled market expectation of +0.3% and translated into an annual rate of +2.9%, exceeding the BOE’s target of +2%. According the ONS, the surge in annual rate was driven by some one-off events happened in 2008: -2.5% VAT cut, plunge in oil price and discounts done by shops amidst recession. However, inflation pressure will probably increase further after the VAT returns to normal (17.5%) this year.
Gold price continues consolidating with a narrow range as USD’s movement against major currencies is mixed today. GFMS released it 2009 survey last week and forecast the yellow metal’s price may rise to 1230, as well as may fall to 990, in 1H10. In the presentation, the research agency said that robust investment and concerns of inflation and weakness in USD should support price in coming months. Moreover, low real interest rate environment and bumpy economic recovery should be beneficial for the precious metal. Concerning supply, mine production growth will be ‘marginal’ and does not represent change in trend.
That said, GFMS also downside risks which include potential increase in net official sector sales and growing risk of ‘Vulnerability’ to an eventual investment setback.
Stock markets retreat. In Asia, the MSCI Asian Pacific Index lost -0.6%. Benchmark indices for Japan, Australia, Taiwan, etc also slipped. In Japan, the Nikkei 225 Stock Average dropped -0.85 to 10765 as rise in Japanese yen may hurt exports. Honda Motor slid -2.1% while Panasonic lost -2.6% Consumer financing company Promise plummeted -9.7% as the government refused to relax rules for consumer lenders. In contrast, Hong Kong’s Hang Seng Index gained +1% to 21678 after news said that Shanghai may allow individual investors to invest in abroad.
In Europe, stocks decline as disappointing earnings results by Alstom and Casino Guichard-Perrachon hurt sentiments. Benchmark indices lose almost -1%.
Source: Oil n Gold