Written by Sumit Roy  |

July 07, 2011

Morning Call: Oil Rises After ADP Jobs Data, Gold Steady After ECB Rate Hike

Details

Bullish ADP jobs data renews hopes for a second-half economic acceleration.

IN TODAY'S HEADLINES ...

• The rally in commodities continues this morning, as attention now shifts to key data on U.S. employment. ADP—a payroll processor—estimated that 157,000 private jobs were created in the month of June—more than double the 70K expectation and well above the 36K it reported for May. Tomorrow's official government report is expected to show a 100K increase in total nonfarm payrolls; a 125K increase in private payrolls; and a 9.1 percent unemployment rate, which would be flat from May. Given the big beat on the ADP number, these expectations could increase between now and tomorrow.
  
  
• Precious metals are consolidating near the flat line after yesterday's surge. The U.S. dollar is rising for a third straight session, but that is more a reflection of euro weakness than dollar strength. Moreover, that euro weakness stems from renewed concerns about the debt situation in Europe, thus the uptick in the greenback has had minimal impact on gold or silver. As discussed in our latest Precious Metals Monitor, Portuguese and Italian yield spreads are at fresh records, which is very supportive of continued gains in the complex.
  
  Meanwhile, as widely expected, the European Central Bank raised benchmark overnight interest rate by 25 basis points to 1.5 percent. ECB monetary policy has failed to have any significant impact on precious metals; Federal Reserve policy has been much more influential.
  Gold holds below $1,530/oz
  
  
• Crude oil is notably higher ahead of the release of the latest U.S. inventory figures from the EIA. WTI is now above $98, while Brent trades near $116. Natural gas inventory figures will also be released today at their usual 10:30 a.m. EST, but the oil data is one day late due to the Fourth of July holiday. As usual, the API—an industry group—released its less-authoritative estimates a day before the EIA data. According to the API, crude inventories fell by 3.2 mmbbl last week; gasoline inventories fell by 1.9 mmbbl; and distillate inventories fell by 1.6 mmbbl.
  Oil Rises in New York on Signs US Crude Stockpiles Shrank a Fifth Week
  
  
• The agriculture complex is narrowly mixed, with corn and soybeans higher and wheat lower. Grains have been lagging the rally in other commodities due to last week's surprise inventory figures from the USDA. All told, wheat is sitting near a one-year low, while corn trades just above four-month lows.  
  Wheat Drops for Second Day as US Weather Improves, Russia Exports Resume
  
  
• Copper advanced as high as $9,600/mt on the London Metal Exchange on Thursday, putting the industrial metal at the highest level since April 21. If Goldman Sachs is correct, prices could be headed even higher. "We see further upside in copper prices despite the recent rally," analysts at the firm said. "We expect ... demand growth will be sufficient to substantially tighten the copper market over the next year, especially as Chinese buyers continue to return to the market."
  Copper up on easing Greece concern, supply worry

What to Watch For:

8:15 a.m. EDT: ADP Employment Change (June)

8:30 a.m. EDT: Initial Jobless Claims

10:30 a.m. EDT: Weekly Natural Gas Storage Report

11:00 a.m. EDT: Weekly Petroleum Status Report