Those watching for the US PPI numbers last night might have seen Rick Santelli on CNBC proclaiming he 'doesn’t believe the government numbers', and perhaps deflation fear is just an excuse for not tapering. We can blame it on the summer, low trading volume or light data days, all of which gives traders time for chatter and imagination. One thing that’s certain is that the Fed needs to address the tapering timeline so that the market can move pass this uncertainty.
Market participants are going to watch out for the data dump both during the Asian trading session and the US tonight (jobless, CPI, industrial production). US PPI was muted and unchanged, analysts were expecting a 0.3% rise after a June 0.8% reading. The New York Fed published a Q2 quarterly report on household debt and credit showing a decline in “household debt by 0.7% to $11.15 trillion from the previous quarter and 12% below the peak in Q3 2008”.
Bank Indonesia is expected to keep its benchmark interest rate unchanged at 6.50% after rate hikes of 75 basis points over the last two monetary meetings. The country is battling high inflation of 8.6% from a rise in food and fuel prices and a tumbling rupiah. Indonesia’s economic growth has been decelerating.
The less robust outlook has prompted the central bank to cut its forecast to 5.8%, the slowest pace in nearly three years from the initial target of 6.3%. The rupiah was the worst performer last year in the emerging markets, and this year it has fallen more than 6%.
In commodities, Paulson and Soros made headlines for cutting their exposure in gold. Our view in gold holds. Gold futures have recovered close to 10% since touching a low of $1179 on 28 June.
Copper futures are trading well above our support line of $328, economic stability in the eurozone continues to support prices and the immediate level of resistance is $340.
Crude prices are inching higher and testing their resistance level. WTI rose on data from EIA that showed crude supplies fell 2.8 million barrels last week to 360.5 million, and stockpiles declined. Brent is testing the resistance of the range at $110. Staying above this could see the next price level of $110-$112.