Commodities were generally firm after strong European confidence data and bigger-than-expected decline in initial jobless claims in the US. WTI crude oil price rebounded strongly and pared most of the losses made over the past 2 days amid USD's weakness. The front-month contract surged to as high as 78.89 before closing at 78.36, up +1.78%. Natural gas rallied as gas storage rose less than expected in the US while gold price also climbed higher and settled at 1168.4, up +0.69%.
The US Energy Department reported gas inventory added +28 bcf to 2919 bcf in the week ended July 23. Stocks dropped -94 bcf from the same period last year but remained +239 bcf (+8.9%) above the 5-year average of 2680 bcf. Gas price extended the rally for a 4th day and settled at 4.827, up +2.31%.
The dollar plunged to a 12-week low against the euro as economic data in the US has been mixed but biased to the downside while that in the Eurozone has shown improvement after enduring a tough period. At the same time, concerns over sovereign crisis in peripheral European countries continue to diminish as debt-ridden economies have been actively implementing fiscal consolidations measures and economic indicators have been better-than-expected.
Initial jobless claims slipped -11K to 457K (consensus: 460K) in the week ended July 24. The drop also brought the 4-week moving average down to 452.5K, the lowest since the beginning of May, from 457K. While the reading was better than expected, the sluggish decline signals that the job market is improving very slowly.
Stock markets failed to be stimulated by the jobless claims report as corporate earnings in the consumer sector were uninspiring. Kellogg reported a -15% decline in net income to $302M in the quarter ended July 3. The management also revised down its profit forecast for the year due to cereal recall last month. Black & Decker, a diversified worldwide supplier of tools and solutions with sales mainly in the US, revised down its sale guidance for 2010. DJIA and S&P 500 fell -0.3% and -0.4% respectively.
Focus of the day is US' GDP report. The economy probably grew by an annualized +2.5% q/q in 2Q10, an ease from +2.7% in 1Q10 and +5.6% in 4Q09.