Financial markets gained yesterday as boosted by encouraging corporate earnings results and US retail sales. The focus in the Eurozone continued to be when Spain would request for bailout and what, if any, concessions would be given to Greece in terms of fiscal austerity. In the commodity sector, crude oil prices rebounded as sanctions against Iran tightened. The front-month contract for WTI crude oil initially plunged to a 4-day low of 89.79 before recovering to 91.85 at close while the equivalent Brent crude contract jumped to 115.8, up +1.03%. The benchmark Comex contract fell for a second consecutive day to a 1-month low of 1729.78 before ending the day at 1737.6, down -1.26%.
Citigroup, the 3rd largest US bank, reported profit from trading and lending in 3Q12. This lifted shares in the banking sector and boosted expectations of Goldman Sachs’ results due today. Sentiment was helped by comments from New York Fed President Dudley. He reaffirmed that the Fed’s policy stance will continue even as the economy recovers. Dudley said the 2013 outlook for the US would remain "somewhat cloudy". He also stressed that "if we were to see some good news on growth I would not expect us to respond in a hasty manner…Only as we became confident that the recovery was securely established would I expect our monetary policy stance to evolve to ensure that it remained appropriate to achievement of our objective: maximum sustainable employment in the context of price stability". Meanwhile, St. Louis Fed President Bullard was more optimistic over the growth outlook, saying that the GDP would expand by +3.5% next year and the Fed’s current policy should not be regarded as "QE Infinity".
In the Eurozone, there was mixed news about Spain. Mexico’s President-elect Enrique Peña Nieto stated after meeting Spanish Prime Minister Rajoy that Spain was "confident" that he would secure an appropriate aid deal. Some analysts also anticipate the debt-ridden country would make formal request as soon as next week. As the next tranche of funding to Greece will be concluded soon, Prime Minister Antonis Samaras stated that he’s confident that "Greece will soon get the next tranche. Its economy needs liquidity like a desert needs rain".
On the dataflow, the US retail sales added +1.1% m/m in September, following a +0.9% gain a month ago. This was higher than market expectations of a +0.8% rise. Excluding auto, retail sales also rose +1.1% after gaining +0.8% in August. The Empire state manufacturing index improved to -6.5 in October from -10.4 a month ago. The market had anticipated a bigger improvement to -4.8. At the RBA minutes for the October meeting, policymakers indicated that recent economic data from mining investment to the labor market suggested that growth will be "somewhat weaker than earlier forecast" and further rate cuts cannot be ruled out.
Oil and Gold Reports contributed by Oil N' Gold
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