The market was quiet yesterday due to the lack of data and the Labor Day holiday in the US. While Asian stocks rallied as a response to last week’s employment report and European bourses crawled higher, the overall tone remains cautious as investors continued to expect slower growth and lower inflation in the second half of the year. The data that might have caught attention was Engineering Employers Federation (EEF)‘s manufacturing report which showed that UK’s output and new order balances jumped +33% and +35% respectively over the past 3 months. These were the highest levels since the survey began in 1995 and suggested growth in manufacturing output should ‘at least continue into the next quarter’. Benchmark European indices opened higher and remained firm throughout the day. Gains were limited as Sentix’s report revealed an unexpected dip in European investor confidence in September. The index slipped to 7.6 from a 2-year high of 8.5 in August. The Stoxx600 index ended the day +0.2% higher.

German bunds surged for a first day in 4 after weaker-than-expected confidence data and comment from ECB member Ewald Nowotny that the central bank will wait until at least December to exit stimulus measures. This signalled interest rates will stay exceptionally low in coming months.

Crude oil pulled back as the Labor Day holiday marked the end of the summer driving season and signalled lower gasoline demand in coming months. The next catalyst for a tighter oil market is hurricane disruptions. The US National Hurricane Center said that Tropical Storm Hermine made landfall in northeastern Mexico today. However, it didn’t cause much damage in oil facilities in the Gulf of Mexico. Indeed, there have been 8 named storms of the Atlantic hurricane season and none of them have threatened the region seriously so far. The US National Hurricane Center is also monitoring the path of Tropical Storm Gaston in the Atlantic. The agency said it has a 70% chance of re-forming into a tropical cyclone over the next 2 days. While the news may trigger speculations on lower production as refinery in the region may be forced to shut down, we do not view the impact as significant given the huge gasoline inventory.

Gold changed little but remained hovering at levels around 1250. Silver retreated after soaring to 19.985, the highest level since 2008, last Friday. Gold/silver ratio fell to a 5-month low of 62.8 yesterday. Platinum strengthened further as a strike in Northam Platinum is expected to tighten supply.