Crude oil prices retreated for three days in a row. After initially rising to 18-month high of 55.24, the front-month WTI crude contract reversed gains and ended the day at 52.33, down -2.59%. Settling at 55.47, the front-month Brent crude contract also plunged -2.38%, after rising to 58.37 earlier on Tuesday. Traders took profit as the OPEC/non-OPEC output cut would take effect on Sunday. Precious metals strengthened across the board. The benchmark Comex gold and silver contracts gained +0.9% and +2.64% respectively. For PGMs, the Nymex platinum and palladium contracts jumped +4.18% and +3.9%, respectively. Short covering was probably the cause of the price rally. Equities remained firm. Wall Street gained with DJIA and S&P 500 indices adding +0.6% and +0.85% respectively. US dollar remained resilience with the DXY index making a 15-year high of 103.82 before pullback.
The US ISM manufacturing index rose to 54.7 in December from 53.2 a month ago. The market had anticipated a milder increase to 53.6. Meanwhile, the "new orders index jumped +7.2 points to 60.2, whilst the "production" index added +4.3 points to 60.3 last month. The "employment" index climbed +0.8 point higher to 53.1. As the institute suggested, "the PMI, new orders, production and employment indices all registered new highs for the year 2016, and the forward-looking comments from the panel are largely positive". On a separate note, the Markit manufacturing PMI edged +0.1 point higher to a 21-month high of 54.3 in December. According to the agency, "the combination of improving current demand and optimism for a further upturn in 2017 prompted companies to build inventory and boost capacity. The latter was reflected in the largest rise in factory payroll numbers for one and a half years". It added that "the upturn is being driven almost entirely by rising demand from domestic customers, with exports stymied by the dollar's recent surge". US' construction spending gained +0.9% in November, beating expectations of +0.5% and October's +0.6%. The FOMC minutes for the December meeting would be due today. Besides the discussion over the +25 bps rate hike decision made on the month, we are closely watching for the discussion of potential monetary policy changes as Trump takes office. The president-elect has been proposing pro-growth fiscal policy. We would also look for the rationale behind the more hawkish shift in the dot plot which signals 3 rate hikes in 2017.
In Europe, headline CPI in Germany accelerated to +1.7% y/y in Decembner, from +0.8% a month ago. This also beat consensus of +1.4%. The increase was mainly driven by the rise in oil prices as well as the +2.5% increase in food inflation. Eurozone's inflation report would be due today. Headline CPI probably improved to +1% y/y in December, from +0.6% a month ago. Core CPI might have stayed unchanged at +0.8%.