Commodity prices decline across the board as fears about global economic slowdown prompt selling. Decline in crude oil accelerates as driven by weakness in stock markets. The front-month WTI contract plummeted to as low as 72.02 amid speculations of weak US housing data and huge oil supplies. Gold also weakens and the benchmark contract drops below 1220. Despite the pullback, we remain bullish towards gold’s long-term outlook as high deficits, low bond yields and loss of confidence towards fiat currencies should drive investors to the yellow metal.

Stocks sunk in both Asian and European session. In Asia, the MSCI Asia Pacific Index lost -0.7% with Japan’s Nikkei 225 Stock Average settling at the lowest level since May 2009. European bourses opened lower with major indices losing more than -1%. Economic data released today has so far been mixed. In the UK, BBA Mortgage Approvals fell to 33.7K in July from a downwardly revised 34.6K a month ago. The market had anticipated an improvement to 36.3K. In the Eurozone, industrial new orders grew +2.5% m/m in July while June’s reading was revised up to +4.1%. Yet this news was overshadowed by a sharp increase in Germany’s budget deficits. The biggest economy in the Eurozone recorded net borrowing of 42.8B euro in 1H10, up from 18.7B euro the same period last year. At current rate of 3.5%, Germany’s deficit as % of GDP may overshoot EU’s threshold of 3% this year. US’ existing home sales probably slumped -18.8% m/m to 4.63M in July. This would bring sales below recent trough of 5.01M made in February. Modest boost in sales from the tax credits and deepening in the decline after the incentive expired reveal that the housing market remains in a dismal situation.

China released detailed trade statistics for July. Imports for crude oil were disappointing as it slipped -3.2% y/y to 4.487M bpd during the month. According to Platts’ estimate, apparent oil demand plunged to 8.47M bpd, down -5.6% from June and only up +2.7% from the same period last year. Concerning oil products, imports fell -22.3% y/y to 0.65M bpd while exports rose +16.6% y/y to 0.62M during the month. China remained a net exporter of gasoline, diesel and jet fuel.

Imports of refined copper, and unwrought copper & copper products recorded monthly gains for the first time since March. The reversals were support by SHFE/LME arbitrage for imports in June and early July. Moreover, decline in copper production in July also raised demand for imports. That said, we remain cautious about the outlook for Chinese growth and expect demand for base metals to weaken in coming months. As we mentioned before, new loans in China have been a leading indicator for refined copper imports, the falling trend in the former indicates a slowdown in the latter.