LONDON: Commodity markets mostly rallied this week as China cut interest rates for the first time in more than two years, boosting the demand outlook in the Asian powerhouse.
Prices also won support after European Central Bank chief Mario Draghi signalled readiness to act quickly to deter deflation, sparking fresh stimulus hopes. “Markets in Europe took a double dose of stimulus on Friday; Mario Draghi again implied the ECB is moving towards full quantitative easing and shortly afterwards China cut interest rates for the first time in two years sending commodities and risky assets flying,” said CMC Markets analyst Jasper Lawler.
OIL: Crude oil raced higher after the People’s Bank of China unexpectedly moved Friday to prop up flagging growth in the world’s second-largest economy. The PBoC cut its one-year deposit rate by 0.25 of a percentage point to 2.75 percent and reduced the one-year lending rate by 0.40 of a percentage point to 5.6 percent.
Traders also focused on whether the Organisation of the Petroleum Exporting Countries was likely to cut output to tackle recent heavy price falls. Prices began the week on the back foot, sinking on data showed Japan sank back into recession and on scepticism that Opec will reach a deal to cut output.
Japan, the world’s third largest economy, shrank 0.4 percent in the third quarter. That decline followed a revised 1.9 percent contraction in the previous three months. Weak economic data from China, Japan and other regions has stoked fears of a growing oil glut.
Oil rebounded on Thursday following strong economic reports from the United States that offset disappointing data from China and the eurozone. And the market also pushed higher on Friday on hopes that the OPEC cartel will overcome internal resistance to trim output.
Despite a drop of more than 25 percent in oil prices since June, Opec remains divided on whether to take action at its November 27 meeting in Vienna.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in January stood at $79.56 a barrel compared with $78.77 one week earlier. On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for December rose to $75.80 a barrel from $74.92 for the expired December contract a week earlier.
PRECIOUS METALS: Gold soared on China’s rate hike and reports of Russian stockpiling, as the market rebounded from recent four-year lows and dragged other metals higher.
By late Friday on the London Bullion Market, the price of gold rebounded to $1,203.75 an ounce from $1,169 a week earlier. Silver jumped to $16.30 an ounce from $15.35. On the London Platinum and Palladium Market, platinum rallied to $1,230 an ounce from $1,178. Palladium increased to $794 an ounce from $760.
BASE METALS: Base or industrial metal prices also hurtled higher on the news from Beijing. “Copper alongside other industrial metals surged on the back of the Chinese rate hike,” said Lawler at CMC Markets.
“Lower borrowing costs could act to reflate the Chinese housing market that had been on the decline in recent months, copper and iron ore are primary materials used in housing and construction.”
By Friday on the London Metal Exchange, copper for delivery in three months increased to $6,739.75 a tonne from $6,616.50 a week earlier.
Three-month aluminium rose to $2,061.25 tonne from $2,016. Three-month lead gained to $2,063 a tonne from $2,020. Three-month tin rebounded to $20,295 a tonne from $19,830. Three-month nickel rallied to $16,463 a tonne from $15,392. Three-month zinc increased to $2,302 a tonne from $2,242.75.
COCOA: Prices weakened as concerns over the Ebola outbreak continued to dim in key producing nations Ivory Coast and Ghana.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in March fell to £1,869 a tonne from £1,877 a week earlier. On the ICE Futures US exchange, cocoa for March eased to $2,821 a tonne from $2,822 a week earlier.
SUGAR: Prices fell on the back of favourable growing conditions in Brazil, with additional pressure from the rising US currency. By Friday on LIFFE, the price of a tonne of white sugar for delivery in March reversed to $417.50 from $420.40 a week earlier. On ICE Futures US, the price of unrefined sugar for March eased to 15.96 US cents a pound from 15.99 US cents a week earlier.
COFFEE: Futures pushed lower on optimism over output from key producer Brazil. “The Arabica coffee price fell ... after a US Department of Agriculture (USDA) attache upwardly revised his estimate for this year’s Brazilian coffee crop by 1.7 million to 51.2 million bags,” said Commerzbank analysts.
By Friday on ICE Futures US, Arabica for delivery in March stood at 188.85 US cents a pound compared with 195.80 cents one week earlier. On LIFFE, Robusta for January slid to $2,070 a tonne from $2,083 a week earlier.
RUBBER: Kuala Lumpur rubber prices fell on the back of rising regional currencies.
The Malaysian Rubber Board’s benchmark SMR20 declined to 153.30 US cents a kilo from 155.20 US cents the previous week.
AFP
