Crude oil extends weakness in European session despite stronger-than-expected economic data and robust corporate earnings results. While sovereign crisis over peripheral European countries remain the hottest topic, worries over tightening in China and expectations of crude stock builds are weighing on the market. Currently trading at 83.2, the front-month contract of WTI crude oil will likely lose for a second day.
Realizing the problem in Greece will take longer-than-previously-expected to resolve, investors dump the euro as well as other 'growth' assets. Investments in the dollar and benchmark European stock indices opening lower. Apart from sovereign risks in the 16-nation Eurozone, stocks are down amid worries over deeper tightening measures in China. Investors concern China's cooling measures in its property market will dampen economic growth. China Vanke, China's largest developer, said profit plummeted -53% y/y in 1Q10.
These worries overshadowed strong earnings results and European economic data. BP, the biggest oil and gas producer in the Gulf of Mexico, reported a +14% increase in net income to $6.08B in 1Q10, with helps of high crude oil price and pick-up in refinery margins. Other big oil companies will be reporting their first quarter earnings later in the week. Royal Dutch Shell will report tomorrow and Exxon Mobil on April 29.
In Germany, Gfk consumer sentiment improved to 3.8 in May, compared with consensus of 3.2. April's reading was also revised up to 3.4 from 3.2. In Switzerland, consumption indicator rose to 1.71 in March from 1.2 in February. Later in the US session, the Conference Board will probably report that consumer confidence rose to 53.7 in April from 52.5 a month ago. S&P/Case-Shiller Composite 20 Index is expected to have recorded annual gain of +0.8% in February, following a drop of -0.7% in January.
Despite narrow-trading, gold's near-term outlook remains weak. Although sovereign crisis in the Eurozone has attracted gold buying, severe selloff in the euro and strength in USD are indeed detrimental to the yellow metal.
The Fed will be holding a 2-day FOMC meeting to discuss about economic and monetary outlook. While it's widely the Fed will leave the policy rate unchanged at 0-0.25% and maintain the guidance that exceptionally low level of interest rates will be kept for an extended period, the focus is on the members' economic outlook. Given recent strong economic data, it's likely that the Fed will sound more upbeat on US' recovery and growth.
Market interpretations of the Fed statement will have impacts on gold price. The more hawkish the statement is, the earlier the Fed will implement the first rate hike. This is positive for the dollar but negative for gold.
No comments:
Post a Comment