European financial markets remained pressured amid an inconclusive election in Italy. The US market was lifted after dovish comments from the Fed Chairman Ben Bernanke and more upbeat economic data. The Wall Street gained with the DJIA and the S&P 500 indices rising +0.84% and +0.61% respectively. In the commodity sector, the front-month contract for WTI crude oil slipped -0.52% while the Brent crude contract plunged to a 1-month low of 112.71 before settling at 112.71. Gold price rebounded for a second day with the benchmark Comex contract soaring to a 6-day high of 1619.7 before ending the day at 1615.5, up +1.82%.
The Italian Interior Ministry showed that, out of the 315 seats in the Senate, Bersani centre-left party has taken 113 seats while Berlusconi’s centre-right has got 116. Grillo’s Five Star movement and Monti’s centrists have got 54 and 18 seats respectively, the result suggested that there is no party with the majority in a chamber which a government must control to pass legislation. A caretaker government is the likeliest outcome and this might lead to another round of election. Ongoing political uncertainty in Italy is expected to adversely affect European recovery and would not help the troubled economy in the country.
At the testimony before the Senate, the Fed Chairman Bernanke continued to support the QE measures. He stated that “in the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear”. Concerning the costs of the QE program, Bernanke said that the Fed does not “see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more-rapid job creation”. He did not mention the chance of reducing monetary easing. Concerning fiscal policy, the Chairman suggested the Congress to “consider replacing the sharp, frontloaded spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantiality in the longer run”.
On the data flow, the US consumer confidence surprisingly rose to 69.6 in February from a downwardly revised 58.4 in January. New home sales climbed +59K to 437 in January. Today, the Eurozone economic confidence probably added +0.5 point to 89.7 in February while industrial confidence might have improved +0.4 point to -13.5 during the month. The US durable goods orders probably dropped -4% in January after a +4.6% gain a month ago. Excluding transportations, the reading might have slipped -0.4%, following a +1.3% gain in December. Pending home sales probably gained +2% m/m in January after a -4.3% decline a month ago.
The industry-sponsored API estimated that crude inventory added +0.90 mmb in the week ended February 20. Gasoline and distillate inventories slipped -1.4 mmb and -1.7 mmb respectively. The official DOE/EIA data might show that crude stock added +2.6 mmb. For fuels, gasoline and distillate inventories probably slipped -1.5 mmb and -1.7 mmb respectively.
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