FX:Gold declined 2.5% for its second straight weekly decline
Market Commentary
Spotlight of the Week
U.S. Equity: This week, all eyes will focus on Federal Reserve Chairman Ben Bernanke as Federal Open Market Committee (FOMC) will spend two days mulling over what monetary policy to implement in order to give the stalled U.S. economy a boost. The Fed could potentially try to pump money into the economy by purchasing bonds through a third round of quantitative easing, known as QE3.
The Fed may also try to boost lending by swapping out short-term bonds in its portfolio with long-term Treasury bonds. The intended outcome is to lower long term interest rates without increasing the size of the Fed's balance sheet in order to encourage borrowing and investment. However, the reluctance to invest is due to enormous slack capacity and weak demand for output. As such, announcement of easing monetary policy will likely booster investor confidence in the short term, but unlikely to change the course of economic downturn.
Market Summary
Gold: Gold declined 2.5% for its second straight weekly decline. With funds scaling positions, spot gold sank to a three week low of $1761.94 last Thursday before Asian buying boosted prices back above the $1800 level. Based on CFTC data, money managers slashed their bullish bets in gold futures and options in the week ended Sept 13. Managed money net long positions in COMEX gold fell 12,077 lots to 185,767 lots. Ahead, traders, institutional investors and physical players will attend the annual industry gettogether organised by the London Bullion Marketing Association in Montreal.
Crude Oil: U.S. crude oil edged up less than 1% last week as persistent Eurozone debt woes kept gains capped. While crude oil rose to a high of $90.52 a barrel last week, gains were quickly pared. The EIA reported that crude stocks dropped 6.7 million barrels to 346.38 million barrels in the week to Sept 9. This was the biggest weekly drop this year and took inventories to their lowest level since February. Gasoline stocks rose however as average gasoline demand for the last four weeks fell 2.7% from a year ago.
Currencies: The Euro rose against the U.S. dollar for the first time in three weeks after the European Central Bank said it will lend dollars to euro-area banks, tempering liquidity concern amid the region’s sovereign debt crisis. On the other hand, Asian currencies fell this week, with Indonesia’s rupiah sliding the most since June 2009, as investors favour safer bets in the greenback compared to emerging market assets.
Indices: U.S. stocks advanced this week as government officials and central bankers took steps to ease the European debt crisis. European stocks also rose for the third week in four as Germany and France said Greece will remain a euro member and the European Central Bank announced measures with four other central banks to ensure banks have enough U.S dollars liquidity. China’s stocks fell to a 14-month low after Premier Wen Jiabao said the government will take measures to control inflation.
