Commodities Daily - July 24, 2020

> Oil slides alongside global stock markets on downbeat US jobs data and fears over demand; DM PMIs in focus today. After trading near $43.5/bbl this morning, Brent began to slide and now appears on track to test yesterday's intraday low of $43.1/bbl. In our view, Brent is unlikely to break below technical support at $42.8/bbl during the first half of the day today, as the preliminary July eurozone PMI data from IHS Markit came out upbeat. However, the US PMI data due at 16:45 Moscow time could surprise to the downside, strengthening concerns that the US economic recovery is now entering into a more gradual phase. If negative global risk sentiment persists and major stock indexes extend yesterday's losses, we think Brent could drop all the way to the $42.2/bbl technical support level. The other key data releases today are US new home sales and the Baker Hughes rig counts.> Gold prices buoyed by disappointing US initial jobless claims. Gold advanced 0.9% to $1,887/oz yesterday on a day of volatile trading (around 19:00 Moscow time quotes even tested $1,897/oz). The main event today will be the July preliminary Markit PMIs for the US and eurozone, as well as data on US new home sales for June. As we write, gold is on the advance again today and has nearly broken through $1,900/oz. We think gold will likely rally further today during the US session.OIL SLIDES ALONGSIDE GLOBAL STOCK MARKETS ON DOWNBEAT US JOBS DATA AND FEARS OVER DEMAND; DM PMIS IN FOCUS TODAYDuring the first half of the day yesterday, front-month Brent gained $0.6/bbl amid positive global risk sentiment and hit an intraday high of $44.8/bbl (yesterday, we highlighted strong technical resistance at $44.9/bbl). A sharp reversal in sentiment pressured Brent toward $44/bbl, and then a reported uptick in US initial jobless claims to 1.4 mln (spurring stories in the media casting doubt on the US economic recovery as Covid-19 continues to spread) provided additional headwinds for risk assets, pushing Brent below the mark. During the US trading session, risk sentiment continued to deteriorate amid reports that US daily Covid-19 deaths remained above 1,000 for the third straight day (though well below the levels seen in April, when around 2,000 people on average were dying per day) as the pandemic continued to spread in southern and western US states. Brent eventually settled at $43.31/bbl, fixing $0.98/bbl below the previous settlement. Indicators such as industrial production and employment data strongly suggest that overall economic activity in the US remains well below pre-pandemic levels amid the resurgence in infections. This is becoming increasingly important for oil investors, who are waiting for the US oil and refined product market (the largest globally) to rebalance. The expected strong inventory drawdowns have not yet materialized despite still-subdued production, as the anticipated recovery in demand has been held back by the weak economic recovery.After trading near $43.5/bbl this morning, Brent began to slide and now appears on track to test yesterday's intraday low of $43.1/bbl. One negative factor at play this morning is that China ordered the US to close its consulate in Chengdu in response to the closure of China's consulate in Houston earlier this week. The US president and secretary of state also made negative remarks about trade relations with China and the country's government last night, while the unveiling of a near-final draft of the next US stimulus plan has been postponed until at least Monday. In our view, Brent is unlikely to break below technical support at $42.8/bbl during the first half of the day today, as the preliminary July eurozone PMI data from IHS Markit came out upbeat. However, the US PMI data due at 16:45 Moscow time could surprise to the downside, strengthening concerns that the US economic recovery is now entering into a more gradual phase. If negative global risk sentiment persists and major stock market indexes extend yesterday's losses, we think Brent could drop all the way to the $42.2/bbl technical support level. The other key data releases today are US new home sales and the Baker Hughes rig LD PRICES BUOYED BY DISAPPOINTING US INITIAL JOBLESS CLAIMSGold prices remained volatile yesterday. Around 19:00 Moscow time bullion approached $1,897/oz, a move driven by the US initial jobless claims report that came in weaker than expected. Claims for the week ending July 18 totaled 1.42 mln, which is above the 1.30 mln consensus and 110k above last week's figure. This indication of a deterioration in the labor market comes as Congress is discussing a new stimulus package, which would become even more critical if job losses continue to mount. Gold prices were also supported by ongoing weakness in the dollar against the euro. Even comments by Treasury Secretary Steven Mnuchin that the US wants a stable dollar did not convince investors and failed to stem the burgeoning demand for gold. As a result, gold purchases by ETFs hit a new record high: daily volumes rose 0.3%, with overall bullion holdings having exceeded 106.5 mln oz. The main event today will be the July preliminary Markit PMIs for the US and eurozone, as well as data on US new home sales for June. As we write, gold is on the advance again and has nearly broken through $1,900/oz. We think gold will likely rally further today during the US