Crude oil trades within a narrow range of 78 and 78.7 in Asian session. Sideways trading is expected to continue until European or even NY sessions when more economic data will be released. The People's Bank of China guided its benchmark 1-year bill yield higher for the second time this month to cool down growth in loans. However, the market did not react much on it.
China's central bank sold one- year bills at a yield of 1.9264%, up +0.08% from last week. This is the second time in a month the PBC guided the 1-year bill yield higher. Reports showed that property sales in China surged +75.5% yoy to RMB 4.4 trillion in 2009 while property price rose +7.8% yoy, the fastest in 18 months, in December. The Chinese government has been worrying about asset bubbles and began tightening last week by raising open-market yields and raising required reserve ratio for bank deposits.
On the macro side, BOC rate decision is the focus of the day. However, we do not expect any change in the central bank's monetary stance. The BOC will likely decide to keep the overnight rate unchanged at 0.25% and reiterate 'conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target'.
Industry-specific data will be API's inventory which will be released after market close. Another week of huge stock-builds should resume recent correction in energy prices.
PGMs have clearly taken over gold and silver as the darlings of precious metal buyers. While platinum contract rallies to 1637, up +2.6% from Friday's close, palladium contract jumped +3% to 461. Both contracts reach highest levels in one and a half year.
According to ETF Securities, holdings of platinum and palladium rose +0.15% and +2.81%, respectively, on January 18 from January 8.The newly launched US ETFs boosted investment demands.
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