Commodity Trends: Rally on easing China concerns

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 May 2010

Industrial commodities again rallied strongly towards weekend as China reassured markets that it was not overanxious about its euro zone investments. China's denial of a Wednesday Financial Times story that it was reevaluating its European holdings fed a second day of heady gains for riskier assets that have been beaten down this month by fears of a worsening debt crisis in Europe. A sharp drop in the dollar also aided commodities' rise. Despite those gains, gold prices held steady at just above $1,200 an ounce after a three-day rise, underscoring continued uncertainty in financial markets over an economic recovery that remains shaky. U.S. economic growth was slower than expected in the first quarter.
POINTERS
BSE Sensex Post biggest weekly gains since March
BSE Sensex posted its biggest weekly gain since early March, as it climbed 1.2% on Friday (May 28), joining a global markets rally triggered by bargain hunting after China’s assurance that Europe will remain a major investment market.
Metal makers Tata Steel, Hindalco and Sterlite Industries gained the most driven by firm metal prices in London as copper prices touched a two-week high. The 30-share BSE index rose 1.18%, or 196.66 points, to 16,863.06 points. It rose 2.5% this week, the most since the week ended March 6, when it registered a 3.6% gain.
Twenty six components of the index closed in the green. But the benchmark is down nearly 4% in May and is set to post its first monthly loss since January, as foreign funds pulled out $2.3 billion from Indian equities this month.
Food Inflation down to 16.23%
Annual food inflation, based on the Wholesale Price Index (WPI), fell to 16.23 per cent for the week ended May 22, lower than the previous week's annual rise of 16.49 per cent, official data released on Thursday showed.Fuel prices rose 12.08 per cent during the latest week, well below the 12.33 per cent increase in the previous week.
According to the data, the Primary Articles group index declined by 0.10 per cent to 298.9 points.The annual rate of inflation, calculated on point-to-point basis, stood at 15.9 per cent for the latest reported week as compared to 16.19 per cent for the previous week.
Reliance makes fifth oil discovery at Cambay
Reliance Industries Ltd (RIL) said it made its fifth oil discovery in Cambay basin in Gujarat.The oil was found in a block that is 130 km from Ahmedabad. The block was awarded under the fifth round of New Exploration Licensing Policy.The well flowed at the rate of 255 barrels of oil per day (bopd), through a 6-mm bean with a flowing tube head pressure of 180 psi (pound per square inch), said the company.
The discovery is significant as this is expected to open more oil pool areas, leading to better hydrocarbon potential within the block, said a statement from RIL. The block covers an area of 635 sq km in two parts; the company holds 100 per cent participating interest in the block
Cocoa prices fall
Cocoa prices fell on concern that Europe’s debt crisis and weaker-than-estimated data on U.S. personal spending may hinder a recovery in demand. Coffee also dropped.
Consumer spending unexpectedly stalled in April as Americans used growing wages to rebuild savings, Commerce Department data show. European policy makers have struggled to control the debt crisis in Portugal, Italy, Greece and Spain. Together, Europe and the U.S. account for 70 percent of world cocoa consumption.
India’s Jute acreage to rise 10-15%
India's jute acreage is likely to rise by 10-15 percent in 2010/11 as higher prices and easier availability of quality seeds have encouraged farmers to expand acreage,Reuters reported. In major spot markets in West Bengal, the country's biggest producer, raw jute prices are hovering between 3,000-3,250 rupees per 100 kg, compared to 2,800-3,000 rupees a year ago.
Bullion
Spot Gold prices rallied last week trading above $1200/oz as the Euro-zone concerns attracted demand as a safe-haven investment. The yellow metal prices jumped above Rs 18600 on the MCX last week. Markets tumbled in the first half of the week on concerns over crisis in the Euro-zone. Financial markets faced selling pressure as investors were flocking towards safer investments. The Bank of Spain stepped up efforts to shut down weak banks. This attempt is to root out some of the underlying problems in their banking system as it leads to concerns about the overall health of the Spanish financial system.
The yellow metal is considered the safest asset in turbulent times. Investors fear that the European crisis would adversely affect the global markets. Despite the bailout package approved by the European Union this month, the countries are still finding it difficult to overcome their problems. Spain is facing unemployment rate of 20% and is also facing huge fiscal deficit. Curtailing the deficits is an uphill task for the ailing economy. In the Coming week, Gold prices is expected to improve as the economic concerns still persist and this would increase demand as the yellow metal is considered as the asset of the last resort in turbulent times. For the coming week, Spot gold has a strong support at $1175/$1160 levels and resistance at $1235/$1250 levels. MCX June Gold has a strong support at Rs.17960/Rs.17630 levels and resistance at Rs.18660/Rs.18990 levels.
Base Metals
Base metals pack declined in the earlier part of the last week but rebounded strongly towards the end of the week taking cues from the positive sentiments in the financial markets. The dollar index touched a high of 87.45 levels on May 25, 2010, but weakened towards the end of the week on improved sentiments. Global markets rallied after China committed to remain invested in Europe. This provided relief amongst the investors gaining some confidence over the European economy. The major indices of Europe comprising the FTSE and the DAX gained wiping out major losses incurred in the beginning of the week. Despite some positive sentiments emerging in the markets, the Euro-zone concerns continue to persist. Markets still remain choppy. MCX June Copper shall find a strong support at 316/313 levels and resistance at 331/335 levels for the coming week.
Energy
Crude oil prices declined in the earlier part of the last week but rebounded strongly towards the end of the week touching a high of $74.95/bbl on May 27, 2010. The weakness in the dollar made the commodity prices look more attractive for holders of other currencies. The US energy department reported on May 26, 2010 that crude oil inventories increased by 1.9 million barrels in the last week. However, this increase was less than the earlier increase of 2.8 million barrels. Crude oil prices also gained after US President Barack Obama said he is extending a moratorium on deepwater offshore oil drilling permits, delaying proposed exploration. This move could curb long-term supply, helping the prices. In the coming week, Crude oil prices will continue to take cues from the dollar. The dollar is expected to remain weak and this will help the crude oil prices to gain. MCX June Contract shall find a strong support at 3315/3130 levels and resistance at 3610/3700 levels for the coming week. NYMEX July Crude has support around $72.70/$69.70 levels whereas resistance is seen around $77.35/$81.32 levels.

Source: Commodity Online