Sentiment Sours ahead of US GDP

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 07:07 ET

Investors lightened positions ahead of US GDP report and next week's FOMC meeting. Risk aversion dominates the market as the pace of US recovery is not sufficient to reduce unemployment and bring inflation back to a normal level. USD and JPY are being sought. The euro tumbled as sovereign concerns in peripheral European economies remained worrisome. Commodities fall in European session with WTI crude oil price sliding to as low as 81.4 and gold remaining pressured below 1350.

US GDP probably expanded at a +2.2% annualized pace in 3Q10 as driven by growth in consumer spending, business investment and inventory growth. While this would be an improvement from +1.7% in 2Q10, the pace of recovery remains gradual and unsustainable. It's likely that the unemployment rate will stay around 10% for some period with such slow economic growth.

The market has fully priced in new QE measures - large-scale asset purchases- from the Fed next week. Yet, there have been heated debates on the size and time of the program. There are several possibilities that policymakers will choose to begin the program: 1) To buy $500B or more in longer-term Treasury over a period, say 6 months. 2) To buy $100B per month with re-evaluation of the program on every FOMC meeting. There's an implication that the purchase will continue until some sorts of improvement are seen in the economy. 3) To buy $50B or less every month. Ultimately, total purchase would amount to $1-2 trillion in all 3 scenarios. Apart from the asset-buying program, the Fed may adopt new communication strategies in ensuring the market that exceptionally low interest rates will be kept for an extended period. More importantly, the Fed will give a clearer idea on what ‘extended period' mean.

Euro's decline amid sovereign concerns in debt-ridden European economies weighed on gold in the near-term. The woes resurfaced as the Portuguese government failed to approve a debt-consolidation plan. In other peripheral nations, Greek Finance Minister George Papaconstantinou the country has ‘serious tax compliance issues and a review of Greece's 2009 Budget showed the deficit was above +15% of GDP, exceeding previous projections. In Ireland, note holders of Anglo Irish Bank Corp plan to oppose a debt exchange worth 20% of their 1.6B euro of securities. Spreads between peripheral bonds and German bunds widened.

Economic data released in the 16-nation region failed to alter euro's outlook in the near-term. Unemployment rate stayed flat at 10.1% while flash CPI reading rose +1.9% y/y (consensus: +1.7%) in September from +1.8% a month ago.

 

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Near-term Negative Sentiment Remains amid Doubts of QE Effectiveness, European Debts

ONG Focus | Insights | Written by Oil N' Gold | Tue Nov 16 10 00:56 ET

The near-term outlook for commodities remains vulnerable. Economic data released in the US yesterday depicted a mixed picture for economic recovery. Worse still, criticism about Fed's QE intensified with some finance officials doubting the effectiveness of the measures to revive growth. Sovereign concerns in peripheral European economies remained under the spotlight. Signs that Ireland will seek assistance from the EU would only calm the market in the short-term. Indeed, Portugal and Spain are also in dangerous positions and may be the next to tap external funds. Despite a brief rebound to 85.77, the front-month contract for WTI pared gains and ended the day flat at 84.86. Gold price remained in consolidative mode with price hovering with a range of 1350 and 1380. Strength in the dollar has limited the upside.

Risk assets, including commodities, were boosted after release of better-than-expected US retail sales in October. The reading jumped +1.2% m/m in October, compared with +0.7% as forecast and +0.6% in September. Sales excluding auto gained +0.4%, same as consensus and September's reading. However, optimism was wiped out as the Empire State manufacturing Index contracted, for the first time in more than a year, to -11.1 in November from 15.7 a month ago. This signaled that expansion in the manufacturing has stalled.

While the market had anticipated Fed's new round of QE measures may help revive growth, Richmond Fed President Jeffrey Lacker said the central bank may need to begin tightening in the 'not-too-distant future' to curb inflation even though 'the unemployment rate is still relatively high by historical standards'. Meanwhile the Wall Street Journals reported that group of Republican-leaning economists will launch a campaign this week calling on the Fed to drop the $600B plan to buy Treasury bonds as 'the planned asset purchases risk currency debasement and inflation' The group does not think the measures will 'achieve the Fed's objective of promoting employment'.

The dollar rebounded, partly as risk appetite diminished and partly as the Fed will face more hurdles in implementing further QE measures.

On the other side the Atlantic, the Eurozone continued to be stricken by sovereign concerns. News said Ireland may eventually request financial assistance from the EU. While this may help the country from going bankrupt, the long-term fiscal problems in peripheral European economies remain unresolved. Eurostats officially lifted its estimate of Greece's deficit to 15.4% of GDP from 13.9% in 2009, surpassing Ireland's 14.4%. Meanwhile, the debt was revised to 126.8 % of GDP, overtaking Italy at 116%. Greece is now the largest budget deficit nation in the Eurozone. The government said the country will reduce the budget deficit to 9.4% of GDP and debt to 144% GDP this year. While this signaled a miss of target made earlier this year (deficit to 7.8% in 2010 and 7% in 2011), the government reiterated the target to bring the shortfall within 3% of GDP by 2014.

 

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Sentiment Sours ahead of US GDP

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 07:07 ET

Investors lightened positions ahead of US GDP report and next week's FOMC meeting. Risk aversion dominates the market as the pace of US recovery is not sufficient to reduce unemployment and bring inflation back to a normal level. USD and JPY are being sought. The euro tumbled as sovereign concerns in peripheral European economies remained worrisome. Commodities fall in European session with WTI crude oil price sliding to as low as 81.4 and gold remaining pressured below 1350.

US GDP probably expanded at a +2.2% annualized pace in 3Q10 as driven by growth in consumer spending, business investment and inventory growth. While this would be an improvement from +1.7% in 2Q10, the pace of recovery remains gradual and unsustainable. It's likely that the unemployment rate will stay around 10% for some period with such slow economic growth.

The market has fully priced in new QE measures - large-scale asset purchases- from the Fed next week. Yet, there have been heated debates on the size and time of the program. There are several possibilities that policymakers will choose to begin the program: 1) To buy $500B or more in longer-term Treasury over a period, say 6 months. 2) To buy $100B per month with re-evaluation of the program on every FOMC meeting. There's an implication that the purchase will continue until some sorts of improvement are seen in the economy. 3) To buy $50B or less every month. Ultimately, total purchase would amount to $1-2 trillion in all 3 scenarios. Apart from the asset-buying program, the Fed may adopt new communication strategies in ensuring the market that exceptionally low interest rates will be kept for an extended period. More importantly, the Fed will give a clearer idea on what ‘extended period' mean.

Euro's decline amid sovereign concerns in debt-ridden European economies weighed on gold in the near-term. The woes resurfaced as the Portuguese government failed to approve a debt-consolidation plan. In other peripheral nations, Greek Finance Minister George Papaconstantinou the country has ‘serious tax compliance issues and a review of Greece's 2009 Budget showed the deficit was above +15% of GDP, exceeding previous projections. In Ireland, note holders of Anglo Irish Bank Corp plan to oppose a debt exchange worth 20% of their 1.6B euro of securities. Spreads between peripheral bonds and German bunds widened.

Economic data released in the 16-nation region failed to alter euro's outlook in the near-term. Unemployment rate stayed flat at 10.1% while flash CPI reading rose +1.9% y/y (consensus: +1.7%) in September from +1.8% a month ago.

 

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View the original article here

Sentiment Sours ahead of US GDP

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 07:07 ET

Investors lightened positions ahead of US GDP report and next week's FOMC meeting. Risk aversion dominates the market as the pace of US recovery is not sufficient to reduce unemployment and bring inflation back to a normal level. USD and JPY are being sought. The euro tumbled as sovereign concerns in peripheral European economies remained worrisome. Commodities fall in European session with WTI crude oil price sliding to as low as 81.4 and gold remaining pressured below 1350.

US GDP probably expanded at a +2.2% annualized pace in 3Q10 as driven by growth in consumer spending, business investment and inventory growth. While this would be an improvement from +1.7% in 2Q10, the pace of recovery remains gradual and unsustainable. It's likely that the unemployment rate will stay around 10% for some period with such slow economic growth.

The market has fully priced in new QE measures - large-scale asset purchases- from the Fed next week. Yet, there have been heated debates on the size and time of the program. There are several possibilities that policymakers will choose to begin the program: 1) To buy $500B or more in longer-term Treasury over a period, say 6 months. 2) To buy $100B per month with re-evaluation of the program on every FOMC meeting. There's an implication that the purchase will continue until some sorts of improvement are seen in the economy. 3) To buy $50B or less every month. Ultimately, total purchase would amount to $1-2 trillion in all 3 scenarios. Apart from the asset-buying program, the Fed may adopt new communication strategies in ensuring the market that exceptionally low interest rates will be kept for an extended period. More importantly, the Fed will give a clearer idea on what ‘extended period' mean.

Euro's decline amid sovereign concerns in debt-ridden European economies weighed on gold in the near-term. The woes resurfaced as the Portuguese government failed to approve a debt-consolidation plan. In other peripheral nations, Greek Finance Minister George Papaconstantinou the country has ‘serious tax compliance issues and a review of Greece's 2009 Budget showed the deficit was above +15% of GDP, exceeding previous projections. In Ireland, note holders of Anglo Irish Bank Corp plan to oppose a debt exchange worth 20% of their 1.6B euro of securities. Spreads between peripheral bonds and German bunds widened.

Economic data released in the 16-nation region failed to alter euro's outlook in the near-term. Unemployment rate stayed flat at 10.1% while flash CPI reading rose +1.9% y/y (consensus: +1.7%) in September from +1.8% a month ago.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Gold Soars as ECB Policymakers Warn about Currency... (Friday, 29 October 2010 00:39 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)Silver Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

View the original article here

Sentiment Sours ahead of US GDP

ONG Focus | Insights | Written by Oil N' Gold | Fri Oct 29 10 07:07 ET

Investors lightened positions ahead of US GDP report and next week's FOMC meeting. Risk aversion dominates the market as the pace of US recovery is not sufficient to reduce unemployment and bring inflation back to a normal level. USD and JPY are being sought. The euro tumbled as sovereign concerns in peripheral European economies remained worrisome. Commodities fall in European session with WTI crude oil price sliding to as low as 81.4 and gold remaining pressured below 1350.

US GDP probably expanded at a +2.2% annualized pace in 3Q10 as driven by growth in consumer spending, business investment and inventory growth. While this would be an improvement from +1.7% in 2Q10, the pace of recovery remains gradual and unsustainable. It's likely that the unemployment rate will stay around 10% for some period with such slow economic growth.

The market has fully priced in new QE measures - large-scale asset purchases- from the Fed next week. Yet, there have been heated debates on the size and time of the program. There are several possibilities that policymakers will choose to begin the program: 1) To buy $500B or more in longer-term Treasury over a period, say 6 months. 2) To buy $100B per month with re-evaluation of the program on every FOMC meeting. There's an implication that the purchase will continue until some sorts of improvement are seen in the economy. 3) To buy $50B or less every month. Ultimately, total purchase would amount to $1-2 trillion in all 3 scenarios. Apart from the asset-buying program, the Fed may adopt new communication strategies in ensuring the market that exceptionally low interest rates will be kept for an extended period. More importantly, the Fed will give a clearer idea on what ‘extended period' mean.

Euro's decline amid sovereign concerns in debt-ridden European economies weighed on gold in the near-term. The woes resurfaced as the Portuguese government failed to approve a debt-consolidation plan. In other peripheral nations, Greek Finance Minister George Papaconstantinou the country has ‘serious tax compliance issues and a review of Greece's 2009 Budget showed the deficit was above +15% of GDP, exceeding previous projections. In Ireland, note holders of Anglo Irish Bank Corp plan to oppose a debt exchange worth 20% of their 1.6B euro of securities. Spreads between peripheral bonds and German bunds widened.

Economic data released in the 16-nation region failed to alter euro's outlook in the near-term. Unemployment rate stayed flat at 10.1% while flash CPI reading rose +1.9% y/y (consensus: +1.7%) in September from +1.8% a month ago.

 

Latest Analysis from this Author

Economic Calendar 11/1/10 (Sunday, 31 October 2010 14:44 ET)Weekly Fundamentals - QE2 Decisions the Key Event ... (Saturday, 30 October 2010 12:11 ET)Gold Weekly Technical Outlook (Friday, 29 October 2010 18:03 ET)Silver Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Crude Oil Weekly Technical Outlook (Friday, 29 October 2010 18:02 ET)Natural Gas Weekly Technical Outlook (Friday, 29 October 2010 18:01 ET)Gold Soars as ECB Policymakers Warn about Currency... (Friday, 29 October 2010 00:39 ET)Economic Calendar 10/29/10 (Thursday, 28 October 2010 11:43 ET)Gold Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)Silver Daily Technical Outlook (Thursday, 28 October 2010 07:14 ET)

View the original article here