Major commodities rebounded on Friday after a two-day rout as latest US data pointed to a sluggish economy, bolstering expectations the stimulus measures by the Federal Reserve might not be rolled back early as speculated. The rally also got a leg-up from the findings of a survey that the German business morale jumped at its fastest pace in over two years in February, suggesting a recovery in Europe’s largest economy following a dismal 2012.
Crude oil, gold, copper, soyabean, wheat and corn recouped some of previous session?s losses, but the commodities are still heading for a weekly drop due to a sharp decline earlier in the week.
Brent crude for April delivery gained 49 cents to $114.02 a barrel in intraday trade on Friday, and US crude rose 25 cents to $93.09 after hitting a six-week low in the previous session. Brent is poised to end the week with a 3% drop, its biggest weekly loss since the seven days through December 7. Brent dropped close to 2% on Thursday ? its sharpest decline since November ? during a two-day slide sparked by the minutes of a Fed meeting that suggested the US central bank could wind down its bond buying programme earlier than expected, and that Saudi Arabia could pump in more oil in the global market.
Initial US jobless claims rose 20,000 last week to a seasonally adjusted 362,000, unwinding the bulk of the previous week’s decline, while the Philadelphia Fed’s business activity index tumbled to minus 12.5 in February, the lowest level since June. Moreover, data revealed consumer prices remained flat for a second straight month in January, suggesting there was little inflationary pressure to worry the Fed to prompt an early rollback of stimulus. Investors are now focussed on US budget debate as President Barack Obama called Republican leaders on Thursday to resume talks.
The Fed’s asset purchases as part of its fourth round of easing measures announced late last year have resulted in a flood of liquidity that has fed a bid for riskier assets, including commodities, in a climate of ultra-low interest rates.
However, analysts say if bearish factors, including fiscal cuts in the US, bleak growth prospects in Europe and less optimism about sustaining growth in China, persist, oil prices may drop below $100 a barrel again.
Copper was off a two-month low in intraday trade on Friday, but it was still heading for its sharpest weekly loss in eight months. Three-month copper on the London Metal Exchange gained 0.57% to $7,905 a tonne intraday after posting its lowest since December 24 on Thursday. The benchmark June copper contract on the Shanghai Futures Exchange rose 0.01% to settle at 57,720 yuan ($9,200) a tonne. However, worries about news that China would extend curbs on its bloating property sector pose risks to any sustained rally in the industrial metal that also tracks the health of an economy.
Spot gold edged up 0.6% to $1,585.19 an ounce intraday, on course for a weekly drop of 1.5%, its second straight weekly loss. US gold futures rose 0.4% to $1,585.30. Analysts say spot gold may consolidate in the range of $1,554.49 to $1,585 next week. However, some analysts point at low US inflation to suggest that gold’s appeal as a hedge against price pressure in the economy is ebbing and the precious metal may still see some correction.
Among farm commodities, wheat for March delivery on the Chicago Board of Trade rose 0.4% to $7.23-3/4 a bushel intraday, after dropping to an eight-month low on Thursday. Wheat has lost 2.5% this week, its sharpest drop since early January. CBOT soybean contract for March rose 1.2% to $15.05-1/2 a bushel intraday, highest since December 17, while March corn gained 0.4% to $6.93-1/4 a bushel despite Thursday’s projection by the US Department Of Agriculture of a possible record harvest in 2013.