China once again was in the limelight last week as strong trade data have triggered further monetary tightening.

US President Barrack Obama?s proposal to disallow banks to own, sponsor or invest in hedge funds for proprietary profit also pressurised commodity prices. Commodities moved southwards even after World Bank upgraded forecast for the global economy.

The report indicated that world economy will grow +2.7% followed by further expansion of +3.2% in 2010.

The International Monetary Fund has also raised its forecast for global economic growth this year to 3.9% from a previous projection of 3.1% made in October. On the macro economic front US housing stats unexpectedly fell last month as unusually cold weather held back construction, but a jump in building permits to a 14-month high indicated that the housing market recovery was intact.

US producer prices rose 0.2% in December as food prices surged, and recorded their largest year-on-year gain in 14 months. But the US financial markets largely ignored the data as a decision by China to further tighten lending raised worries about a global economic recovery.

Concerns over Greece?s ability to finance its budget deficit lifted the US dollar which hit a five-month high against the euro. On the energy front, NYMEX crude oil front month contract fell more than $4 a barrel. Oil has rallied to a 15-month high of almost $84 a barrel this month, before the dollar rebounded and the cold weather that had fed heating oil demand turned warmer.

Oil prices fell as the dollar strengthened and stock market slipped on worries about bank lending curbs in China.

Mixed economic data?s have also led to selling in crude as investors have looked to wider economic data over the past year for signs of economic recovery and a potential rebound in energy demand.

Opec, in its monthly report, have slightly trimmed its forecast of demand for oil in 2010 and said inventories remain high enough to cope with any unexpected rise in winter fuel consumption. Opec’s report adds to signs that the cold winter weather in much of the northern hemisphere earlier in January has done little to increase oil demand. It left its forecast for growth in global oil demand this year unchanged at 820,000 bpd. On charts, crude oil has broken the major support of $74.80 and closed below the same. The next downside target is pegged at $72.85 a barrel.

Copper fell 1.50% on Commex (weekly basis) after Chinese monetary tightening fuelled worries about demand in the world?s biggest consumer and euro?s falling against the dollar. But the sentiment remains bullish due to expectations for a recovery in the developed world and continued robust growth in China, in spite of the prospect of tighter credit conditions. Strong Chinese trade data which was released last week will help fade worries about demand.

Soya bean prices were hammered down for the sixth straight week on both local and global exchanges. India?s record oil imports to 8.4 million tonnes up 35% year on year due to weak monsoons, higher estimates of global soybean production and higher carry over stocks weighed on the prices. Argentinean crop stood at 31 million tonne and the USDA has projected a record high crop of 53 million tonne this season. Brazil has also revised its crop estimates from 63 million tonne to 67 million tonne. According to USDA report, estimated soybean production in the US has been revised from 3.31 million bushels to 3.36 million bushels. World production is revised from 250.25 million tonne to 253.38 million tonne.

World ending stocks were also on the higher side from 57.09 to 59.80 million tonne. In light of world production and carryforward stocks, we are expecting prices will be pressurised in near term.

Further, Chinese credit tightening policy, which is likely to affect global trade, will keep prices down. The arrivals have also begun at the local mandis and are expected to rise due to higher crop estimates. Soybean crop in the year to September 2010 is expected to be about 9 million tonne, higher than the estimated crop of 8.5 million tonne this year. Soyabean futures price on NCDEX is expected to fall further and can test Rs 2,000 ? 2,100 per quintal levels.

(The author is head??commodities, Motilal Oswal Financial Services Ltd)