After sliding to as low as 75.42 earlier in the day, crude oil recovers in European session as stronger-than-expected economic data distract investors from sovereign crisis concerns. IEA's downgrade of global oil demand in 2010, in contrast with upgrades by both OPEC and EIA, has however, complicated the oil market outlook. Gold price extends strength after making a record-high yesterday and is currently trading at 1240.
Eurozone's GDP surprisingly expanded +0.2% q/q in 1Q10, compared with consensus of +0.1%, following a flat reading in the previous quarter. Growths in Germany, France and Italy were +0.2%, +0.1% and +0.5% respectively. Peripheral economy was mixed with Greek GDP shrinking +0.8% while Spain and Portugal GDP rising +0.15 and +1% respectively. On annual basis, economy in the 16-nation region expanded +0.5%, after a contraction of -2.2% in 4Q09. Industrial production grew +1.3% m/m in March (consensus: +1%) from +0.7% in February. From a year- ago basis, the reading surged +6.9%.
In the UK, claimant count rate slipped to 4.7% from 4.8% and the number of people claiming jobless benefits dropped -27.1K to 1.52M. ILO unemployment rate in the 3 months to March however rose to 8% (previous: 7.8%). The pound reverses earlier gains as BOE governor Mervyn King said risks of economic growth has increased and the central bank may expand the 200B-pound asset purchase plan when needed. Sterling rose against the dollar and the euro earlier in the day as the Conservative Party and the Liberal Democrats Party formed a coalition government, resolving uncertainties cast by a hung parliament.
International Energy Agency revised down its oil demand forecasts to 86.4M bpd in 2010. While it represents a +1.89% increase from 2009, the demand is lower than April's projection of 86.63M bpd. According to IEA, the downgrade was mainly driven by 'changes to non-OECD historical baseline data, as slightly higher GDP prognoses from the IMF are counterbalanced by a higher price assumption'. IEA also revised up non-OPEC supply to 52.3M bpd, thus lowering 'call on OPEC' to 28.7M bpd from 28.8M bpd as projected in April.
Gold remains strong in European session as we see further flight for safety. The benchmark contract soared to a new high of 1245.4 earlier in the day. Inflows are seen in all areas including ETFs, futures as well as gold coins and bars. Further upside is likely as long as worries over sovereign crisis remain. Risks are profit-taking and increase in scrap supply which is inevitable at current price level. In India, news said that record gold price may hinder physical gold buying during this year's Akshaya Tritiya festival. Analysts forecast the reduction may be as much as -50% from a year ago.
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