Although commodities initially plunged amid concerns over rate hike in China, prices managed to recover in NY session. However, probably dragged by static stock market movement, energy prices traded generally within a tight range.

WTI crude oil price ended the day flat at 82.11. Recent price movement suggests that the trading range of the front -month contract has shifted up to 75-84 from 70-80, reflecting positive demand expectations from the market. We did not find much industry-specific news that supported price yesterday other than OPEC's mild upgrade on oil demands.

US trade deficit narrowed to $37.3B in January from $40.2B a month ago, while the market had anticipated an increase to $41.0B. Trade deficits narrowed as decline in imports outpaced that in exports. Details in the report show that imports fell for the first time in 5 months while exports the first time in 9 months. These by all means indicate slowdown in growth after the economy emerged from recession.

Specifically, crude oil imports fell to 245 mmb during the month, the smallest since February 1999. The decline has helped lower crude inventory and hence send price higher in recent weeks. However, the impact will be short-lived as imports may rebound in coming months as price surges.

Initial jobless claims slipped, by a less-than-expected amount, to 462K in the first week of March. However, both the 4-week average and continuing claims edged up. The market should pay close attention to claim data as well as other employment data in March as it will be the first month in 2010 that the job market statistics are free from impacts of adverse weather conditions and consensus hiring,

Gold price slumped, together with others in the commodity sector, before finding support above 1100 and rebounded. The benchmark contract closed at 1108.2, almost unchanged from the previous day. Silver, on the other hand, gained +0.8% to 17.16. For PGMs, platinum price surged +1.4% to 1612.7 while palladium continued retreating after making a decade high at 481.95 on Monday.

Gold, which rallied more than +20% last year as led by low global interest rates and massive stimulus measures, will get hurt if central banks begin withdrawing liquidity from the market in an environment of benign inflation. While China's CPI hit a 16-month in January, global inflation remain subdued in general. UK is the only advanced economy with inflation level overshooting official target. Macro-environment does not favor gold's movement in this sense.

In fundamental news, South Africa report the country's mine output increased +7.7% y/y in January, the first time since July 2009 with PGM production surging +17%. However, gold output declined -18% from a year ago. We retain our view on tighter PGM demand/supply outlook in 2010. We expect auto market turnaround as driven by global economic recovery should boost demand while frequent labor strike and power outage in South African remain the biggest overhang in the country's mine operations.