Markets mixed after ECB bonds move, US jobs data

Commodity prices were mixed last week in reaction to the European Central Bank’s fresh action on tackling the eurozone debt crisis and in the wake of disappointing US jobs data, analysts said. PRECIOUS METALS: Gold hit a six-month high and silver the highest level for more than five months on the prospect of more measures from the Federal Reserve to stimulate the economy following Friday’s poor US jobs data. The US economy added only 96,000 jobs in August, but the overall jobless rate fell to 8.1% from 8.3% as more people dropped out of the labour market, the Labor Department said. Economists said the data was likely to strengthen the case for fresh action at the Federal Reserve to boost growth when its policy board meets next week, either delivering stronger easy-money policy signals or even a third round of quantitative easing (QE), or bond purchases. “This report reaffirms that the US economy and labour market are showing unimpressive and extremely modest improvements,” said Jason Schenker at Prestige Economics consultants. It “gives the Fed a lot to think about next week. The Fed may not implement QE3, but today’s report raises the stakes for the Fed to implement some level of additional ‘non-traditional’ monetary policies.” In the wake of Friday’s data, gold futures struck $1,741.70 an ounce, reaching the highest point since the end of February, while silver jumped to $33.67 an ounce—last reached in mid-March. Precious metals also won support as the European Central Bank on Thursday unveiled a key plan to buy the bonds of troubled eurozone nations. ECB chief Mario Draghi said the central bank would buy unlimited amounts of debt from troubled nations like Spain and Italy, in a bid to bring down borrowing costs and prevent the eurozone debt crisis spreading. The news gave markets a huge shot in the arm, sending share prices soaring in Asia, Europe and on Wall Street. Asian stocks and commodity prices were also bolstered by Chinese plans for infrastructure investment, dealers said. By late Friday on the London Bullion Market, gold surged to $1,728 an ounce from $1,648.50 a week earlier. Silver soared to $32.22 an ounce from $30.52. On the London Platinum and Palladium Market, platinum increased to $1,593 an ounce from $1,517. Palladium gained to $647 an ounce from $623. BASE METALS: Prices rallied on action by the ECB and prospects of further Fed stimulus. “Investors are sensing that the Europeans are starting to come to terms with the magnitude of their problems,” said Edward Meir, analyst at broker INTL FCStone. “Whether the European proposals are enough to deal with the many pressing problems still on hand remains to be seen, but in the interim, investors seem happy bidding prices higher.” By late Friday on the London Metal Exchange, copper for delivery in three months jumped to $7,822 a tonne from $7,563 a week earlier. Three-month aluminium rose to $2,033 a tonne from $1,877. Three-month lead climbed to $2,079 a tonne from $1,952. Three-month tin grew to $19,915 a tonne from $19,450. Three-month nickel increased to $16,300 a tonne from $15,905. Three-month zinc advanced to $1,960 a tonne from $1,824. OIL: Oil prices retreated as traders focused on a weak demand outlook for energy. “Despite the fact that the US dollar is getting battered (after the jobs data), oil prices aren’t buying it, slipping back on the deteriorating (demand) fundamentals rather than rising on the basis of potential further easing” by the Federal Reserve, said Michael Hewson, senior analyst at traders CMC Markets. Oil prices were weighed down earlier in the week following a slew of manufacturing data showing downbeat activity in China, Europe and the US. “While ECB moves to solve the eurozone crisis are welcome... energy markets continue to be weighed down by weak economic data,” said Justin Harper, market strategist for trading group IG Markets Singapore. “Manufacturing data has been weak and that shows the economy is still very sluggish and will keep a cap on oil prices,” Harper told AFP on Friday. By late Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in October fell to $112.93 a barrel from $114.08 a week earlier. On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for October dropped to $94.81 a barrel compared with $96.26 the previous week. SUGAR: Sugar futures struck a two-year low in New York at 18.81 cents a pound on expectations of robust Brazilian supplies. “The positive harvest expectations in Brazil are to blame,” Commerzbank said in a note to clients. By Friday on New York’s NYBOT-ICE exchange, the price of unrefined sugar for October dropped to 19.09¢ a pound from 19.65¢. On LIFFE, London’s futures exchange, the price of a tonne of white sugar for delivery in October grew to $549.30 from $547.80 a week earlier. COCOA: Prices reached fresh 10-month highs on tight supply concerns in key producing African nations. “That prices in the past two weeks have climbed by more than 10% is doubtless due to the fact that the continuing dry weather in West Africa is dampening the outlook for the main crop, due to begin in October, and thus increasing the supply risks in 2012-13,” said Commerzbank analysts. “Some parts of Ivory Coast and Ghana have seen just 10-30% of their usual rainfall over the past 45 days. That said, rain is forecast for the next few days, which should help bring prices down.” Prices hit £1,748 a tonne in London and $2,707 in New York—the highest points since November last year. By Friday on LIFFE, cocoa for delivery in December rose to £1,736 a tonne from £1,704 a week earlier. On the NYBOT-ICE, cocoa for December climbed to $2,693 a tonne from $2,607. COFFEE: Coffee futures decreased on the prospect of abundant supplies in Brazil, the world’s biggest exporter of the commodity. By Friday on NYBOT-ICE, Arabica for delivery in December fell to 160.70¢ a pound from 165¢ a week earlier. On LIFFE, Robusta for November dropped to $2,043 a tonne from $2,069. RUBBER: Prices rose on cuts to exports by leading producers Thailand, Indonesia and Malaysia, traders said. The Malaysian Rubber Board’s benchmark SMR20 gained to 254.15¢ a kilo from 253.45¢ the previous week. From gulf times.