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Commodities slipped earlier in the week as concerns over the sovereign debt crisis re-emerged. Investors worried about the Spanish budget plan and whether the debt-ridden would request for financial assistance as sovereign debt yields soared. Market reaction was positive after the announcement. Spain announced to lower 40B euro spending in 2013, including a -8.9% reduction in government ministry and a drop of infrastructure spending from -1.3% of GDP to -0.89%. As the overall fiscal adjustment is focused on reduction in spending instead of tax increases, tax measures account for around 15B euro, or 38%, of adjustment measures scheduled by end-2013. Moreover, the government would take 6 months to carry out structural reforms including the liberalization of the labor market, energy sector and telecommunications. The government also confirmed that the deficit targets are 6.3% of GDP this year and 4.5% next year, down from 8.9% in 2011. Meanwhile, the market also concerned about the deteriorating situation in Greece which will need to add further tightening measures to meet its fiscal target. While not yet disclosed publicly, it's expected that the package would worth of around 13.5B euro, consisting of 10.5B euro in spending cuts and 2.9B euro tax hikes. The plan is expected to be announced on October 1.

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