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Energy prices rose Monday but pared gains in NY session as stock markets declined and DJIX closed below 10000 for the first time in 3 months. Moreover, worries about Greece's issue and oil inventory increase exerted further pressure on prices. WTI crude oil added +1% to settle at 71.89. The contract's intra-day high was at 72.39.
Dow Jones Industrial Average plunged -1.04% to close at 9908 yesterday. It was the first close below 10000 since November 2009 as banking stocks tumbled amid concerns about sovereign crisis in European countries.
Fear of Chinese tightening has been haunting the market since mid-January. Ahead of a government report regarding net bank lending, a survey indicates that new loans made in January exceeded the total made in 4Q09.Figures of CPI and exports will also show rapid growth. Stronger-than-expected readings in Chinese growth are not going to push markets higher. Instead, they trigger investors to dump their risky investors amid concerns over mover aggressive cooling measures from the government.
Sovereign default risks in some Eurozone countries remain high. While the 5-year CDS of Greece's government debt surges above 400 bps, those of Spain, Hungary and Portugal are rising at a fast pace. The trembling fact is contagion from Greece will likely engulf other European countries. This not only will cripple the ECB's exit strategy, but also put 20-30% of the 16-nation region's GDP in threat.
The industry-sponsored API will report its weekly estimates on oil inventory after market close while the US Energy Department will publish the report Wednesday. Consensus forecast crude inventory rose +1.5 mmb while distillate stockpile drew -1.5 mmb.
Gold's movement was similar to crude oil as the benchmark contract rose to as high as 1074.3 before faltering to 1066.2 at close, gaining +1.3%. Silver and PGMs also climbed higher. While silver soared +1.7% to 15.085, platinum and palladium added +0.4% and +2.4% respectively.
Downside risks for precious metal remain as USD stays firm. Last week, net speculative short positions in EUR rose to a new record of 43741 contracts. Net shorts in GBP and CHF also increased while net longs in commodity currencies including AUD, NZD, CAD plummeted. The trend is that investors switched from risky assets to 'safe' investments such as USD and JPY. |
