Commodities Daily - August 4, 2020

> Oil prices move higher on upbeat July manufacturing PMIs despite persisting demand-side fears. Today is quiet data-wise with US factory orders possibly grabbing some attention and the overnight API data on US oil and refined product inventories likely driving prices early tomorrow. Tomorrow will be busy with services and composite PMIs across the globe, eurozone retail sales and EIA data on US oil and refined product inventories. Also, Saudi Aramco's official selling prices for September will be unveiled. In our view, the absence of important data releases today will force investors to concentrate on downbeat demand-side factors. Meanwhile, Reuters is reporting that cities such as Manila and Melbourne are tightening lockdowns, while Norway has stopped cruise ship traffic in what is the latest alarming sign for European travel. Downbeat supply-side fears as OPEC+ moves to raise production are also likely to come into view. We therefore think that Brent could test the $42.8/bbl technical support level, with a break below that likely triggering a fall to $42.2/bbl.> Gold stable yesterday amid upbeat macro data. Yesterday's manufacturing PMIs from the US and Europe were generally better than expected. Markets continue to follow the talks ongoing in the US over another stimulus bill, which monetary policymakers continue to emphasize is vital. This morning, gold has moved just shy of the $1,980/oz mark. We expect it to trade sideways for the remainder of the day. June data on US factory and durable goods orders is due today.OIL PRICES MOVE HIGHER ON UPBEAT JULY MANUFACTURING PMIS DESPITE PERSISTING DEMAND-SIDE FEARSAfter sliding from $43.5/bbl and subsequently failing to consolidate below $43/bbl yesterday, front-month Brent began to advance and almost hit $44.5/bbl mid-way through the US trading session. It eventually settled at $44.15/bbl, fixing $0.85/bbl above the previous settlement. The positive momentum was attributable to upbeat manufacturing PMI data from Asia, Europe and the US, which in most cases beat the consensus. China's official manufacturing PMIs for July first released on Friday already pointed to a robust recovery, but the Caixin index published yesterday was even more upbeat, showing the strongest pace of expansion in manufacturing in almost a decade. This comes on the back of vast policy stimulus, which could even help the economy as a whole to return to its pre-virus trend by the end of the year. Later on, the eurozone manufacturing PMI showed a modest expansion in July, with the index bouncing to 51.8 from June's 47.4, breaking above the 50 mark that separates growth from contraction for the first time since January 2019. The ISM manufacturing index for the US, meanwhile, showed a further rise to 54.2 in July, from 52.6. This comes amid an increase in orders and despite a resurgence in Covid-19 infections. Despite the upbeat reading, Capital Economics yesterday noted that the manufacturing recovery still has a long way to go. All eyes are still on Congress to reach a deal on new fiscal support. The latest news is that the Trump administration is considering expanding fiscal stimulus using executive authority rather than waiting for Congress, though few details or legal justifications are available as yet. In terms of the oil market, the return of China's ample buying (partially stalled due to floods) is all the more important as stalling US demand and rising Covid-19 case counts in Europe are jeopardizing the gradual revival, particularly in air travel.Today is quiet data-wise with US factory orders possibly grabbing some attention and the overnight API data on US oil and refined product inventories likely driving prices early tomorrow. Tomorrow will be busy with services and composite PMIs across the globe, eurozone retail sales and of course the official EIA data on US oil and refined product inventories. Tomorrow the focus will also be on Saudi Aramco's official selling prices for September. If the official selling prices rise or even decrease by less than the market expects, it would be a very clear bullish signal from the Saudis that they want to keep exports in check, which would be a strong price-supportive factor. In our view, the absence of important data releases today will force investors to concentrate on downbeat demand-side factors. Reuters is reporting that cities such as Manila and Melbourne are tightening lockdowns to battle new infections, while Norway has stopped cruise ship traffic in what is the latest alarming sign for European travel. Downbeat supply-side fears as OPEC+ moves to raise production are also likely to come into view. We therefore maintain our view that Brent could test the $42.8/bbl technical support level, with a break below that likely triggering a fall to $42.2/ LD STABLE YESTERDAY AMID UPBEAT MACRO DATAMost of the action in the gold market yesterday was around the release of US macro data at 17:00 Moscow time. The ISM manufacturing index printed above expectations at 54.2 in July, up from 52.6 in June. This gave a boost to the dollar and caused gold to slip to $1,961/oz. However, gold went on to pare these losses and close with a 0.1% gain for the day at $1,977/oz. Markets continue to follow the talks ongoing in the US over another stimulus bill. House Speaker Nancy Pelosi reported yesterday that she would meet with Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows today. She was positive on the progress in the talks but indicated that she did not expect an agreement to be reached this week. Meanwhile, Chicago Fed President Charles Evans said yesterday that monetary policymakers had already deployed their arsenal of tools to combat the effects of the coronavirus and that it was extremely important for the fiscal stimulus to pass.This morning, gold has moved just shy of the $1,980/oz mark. We expect it to trade sideways for the remainder of the day. June data on US factory and durable goods orders is due today at 17:00 Moscow