Saturday, December 10, 2011

COMMODITIES-China's 'Europe fund' helps oil, metals; soy dives

NEW YORK (Dec 9): Oil and copper prices rebounded on Friday from the previous day's drop, on speculation that a new Chinese investment vehicle could help Europe; but a string of earlier losses pulled both markets down for the week.

Sharp losses in agricultural futures also led the broader commodities complex to close down for the day and week.

The 19-commodity Thomson Reuters-Jefferies CRB index finished half a percent down for the session and nearly 2 percent lower for the week after soybean prices hit a 14-month bottom and cocoa 3-year lows.

For the week ahead, investors are also expected to pay attention to U.S. data such as retail sales, consumer prices, manufacturing and jobless claims -- aside from headlines out of Europe -- to gauge direction.

In Friday's session, energy and metals markets rose after Reuters reported that China's central bank plans to create a $300 billion vehicle to manage investment funds in the United States and Europe.

The report "suggests (that) it will make funding conditions easier for struggling euro zone countries", said Sebastien Galy, analyst at Societe Generale in London. Some markets were also bolstered by the European Union's pledge after a two-day summit to pursue tighter integration and stricter budget discipline in the euro zone, although Britain dismissed such notions.

"I think the bottom line from the EU agreement is that it kind of takes the disaster scenario off the table," said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.

"There were a lot of fears that you could see major European banks, particularly French banks, fail if they didn't reach some sort of agreement." U.S. crude oil futures' benchmark front-month contract ended the session up 1 percent at $99.41 a barrel, boosted by the new Chinese investment vehicle for Europe and the EU pledge for tighter fiscal coordination.

On a weekly basis, U.S. crude fell 1.5 percent, weighed down by earlier losses in the week after threats by Standard & Poors to downgrade most of the countries in the euro zone if it did not find the outcome of the EU summit encouraging.

London's Brent crude finished at $108.62 a barrel, up half a percent for the day and down 1.2 percent for the week. Copper climbed in tandem with higher equity markets and a stronger euro versus the dollar after news of the EU agreement. It gathered more steam after the report about China's upcoming investment vehicle for Europe.

Three-month copper on the London Metal Exchange settled at $7,815 a tonne, up $105 from Thursday. For the week, it was down $75.

In New York, U.S. copper's most active contract, March , rose 5.75 cents to finish at $3.5575 per lb. It fell 2.7 cents for the week.

On the agricultural front, soybean futures traded in Chicago fell 2.3 percent to a 14-month low, finishing at $11.07 a bushel. Chicago wheat skidded to a five-month low, while corn dropped more than 1 percent after a government forecast topped expectations for supplies of the key U.S. grains.

New York-traded cocoa for March dropped $64, or 3 percent, to end at $2,067 a tonne. It finished the week down 7.2 percent, dropping for the sixth straight week and marking the biggest weekly drop in three months.

Cocoa futures have fallen more than 22 percent since early November, plumbing 3-year lows and reaching extremely technically oversold levels. The market has been pressured by plentiful nearby supplies and bearish macro sentiment.- Reuters

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