LONDON - Commodity prices had a mixed week as traders tracked Chinese and European interest rate cuts, a strong dollar and disappointing new jobs data in the United States.
“Commodity market sentiment has been almost exclusively driven by central bank decisions over the last two days,” said Currencies Direct analyst Alistair Cotton. The European Central Bank (ECB) cut its main interest rate by a quarter point Thursday to a record low at 0.75 per cent but did not announce any other stimulus measures.
In London, the Bank of England (BoE) kept its main rate at a record low 0.50 per cent but unveiled £50 billion ($78 billion, 62 billion euros) in extra stimulus cash to boost Britain’s recession-hit economy.
China meanwhile trimmed rates for the second time in a month in a shock move. However, some analysts feared the cut indicated that the Chinese economy, the world’s second biggest, was slowing more quickly than expected.
“As expected the ECB and BoE cut the benchmark interest rate and expanded the QE program respectively,” Cotton said.
“But it was the surprise move by Chinese authorities to cut rates ... that has caused most concern across the commodity markets. Cutting rates has increased the prospect of a slowdown in the Chinese economy and hence demand for commodities moving forward.”
OIL: Oil prices managed to rally, despite China worries, as sentiment was buoyed by supply-side worries in Norway.
“Crude oil markets were buoyant this week. Fundamentals set the tone for the move upwards, with strikes in Norway at the core,” Barclays Capital analyst Sudakshina Unnikrishnan said. State oil group Statoil said Thursday it was preparing to shut down all production on the Norwegian continental shelf (NCS) from the start of next week. The lockout will take effect on Monday, July 9, at 24:00 hours (2200 GMT), and will halt all production on the NCS, Statoil said in a statement.
The action will begin just over two weeks into a massive strike by more than 700 North Sea oil workers over pensions.
Toward the end of the week, oil market gains were tempered by the strong dollar and poor US data. The European single currency plunged to one-month lows in the wake of the Thursday’s ECB rate cut and Friday’s US jobs data which showed a net 80,000 new jobs in June, well short of forecasts.
The figures put the average job gains for the second quarter at 75,000 per month, a bad sign for US growth and consumer spending. By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in August was higher at $98.37 a barrel from $95.43 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August rallied to $84.68 from $82.20.
BASE METALS: Base metals prices mostly fell.
“Market reaction to the monetary easing prompted gains in the metals and across risk assets. The gains, however, were quickly surrendered,” said Fast Markets analyst James Moore.
By late Friday on the London Metal Exchange, copper for delivery in three months fell to $7,573 a tonne from $7,684 a week earlier.
Three-month aluminium edged up to $1,910 a tonne from $1,905. Three-month lead slipped to $1,841 a tonne from $1,842.
Three-month tin dipped to $18,750 a tonne from $18,910.
Three-month nickel retreated to $16,513 a tonne from $16,690.
Three-month zinc decreased to $1,840 a tonne from $1,860.
PRECIOUS METALS: Gold and palladium lost their shine but platinum and silver nudged higher.
By late Friday on the London Bullion Market, gold fell to $1,587 an ounce from $1,598.50 a week earlier. Silver rose to $27.32 an ounce from $27.08.
On the London Platinum and Palladium Market, platinum increased to $1,450 an ounce from $1,428. Palladium dropped to $577 an ounce from $578 an ounce.
GRAINS AND SOYA: Prices soared as the supply outlook was hampered by hot dry weather in key producer the United States which could reduce yields.
“Grain prices remain in the spotlight, posting the strongest gains across the commodities complex over the past week as the persistence of hot and dry weather in the US Midwest remains the focus in driving grains prices and in setting sentiment,” said Unnikrishnan at Barclays Capital.
Drought in the United States affecting mainly corn crops will cut forecast world production of grain this year by 23 million tonnes to 2.396 billion tonnes, the Food and Agriculture Organization said Thursday.
Grain market sources in Paris said that drought was also holding back crops in southern Russia and around the Black Sea.
By Friday on the Chicago Board of Trade, maize for delivery in July jumped to $7.52 a bushel from $6.72 a week earlier. Wheat for July was up to $7.95 from $7.39.
July-dated soyabean meal—used in animal feed—advanced to $16.25 a bushel from $15.12.
COFFEE: The coffee market was mixed.
By Friday on NYBOT-ICE, Arabica for delivery in September jumped to 177.35 US cents a pound from 166.65 cents a week earlier. On LIFFE, Robusta for delivery in September dipped to $2,086 a tonne from $2,138.
COCOA: Cocoa held at elevated levels amid forecasts of stretched output from Ivory Coast, which is the world’s biggest producing nation.
By Friday on LIFFE, London’s futures exchange, cocoa for delivery in September eased to £1,565 a tonne from £1,566 a week earlier.
In New York on the NYBOT-ICE, cocoa for September gained to $2,274 a tonne compared with $2,269.
SUGAR: Sugar prices made ground amid supply jitters.
By Friday on LIFFE, the price of a tonne of white sugar for delivery in August rose to $637.40 from $604.50 a week earlier.
On NYBOT-ICE, the price of unrefined sugar for July climbed to 22.09 US cents a pound from 20.81 cents.