SINGAPORE, June 29 (Reuters) – Commodities rallied on Friday after Europe moved to cut soaring borrowing costs in Spain and Italy, lifting investors’ spirits on the last trading day of the quarter that is still bound to be the worst in years for oil and gold.
Oil rose by more than $2, gold jumped over 1 percent and copper gained the most since mid-April after European leaders agreed that euro zone rescue funds could be used to stabilise bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms. [ID:nL6E8HT094]
That gave a big relief to investors in markets from commodities to equities, who had low expectations a summit of European leaders in Brussels would yield solid measures to solve the euro zone debt crisis now running into its third year.
“It still falls short of a concrete solution, but the removal of severe pessimism over what’s going to come out of the EU summit is driving markets higher,” said Vishnu Varathan, market economist at Mizuho Corporate Bank.
“These are very welcome steps taken forward in terms of addressing tail risks and the imminent crisis triggered by the banking sector that may be knocking on the door.”
Brent crude for August delivery touched a high of $93.57 and was up $1.81 at $93.17 a barrel by 0718 GMT. U.S. crude climbed over $2 to $79.73, pulling away from an eight-month low hit in the previous session.
Spot gold rose more than 1 percent to a session high of $1,571.89 an ounce.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro zone crisis in graphics: http://r.reuters.com/hyb65p Commodity performance in 2012: http://link.reuters.com/faz36s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

BUMPY RIDE
But heavy losses since May means Brent crude, which is down more than 24 percent for the second quarter, is still on track to post its worst three-month period since the last quarter of 2008 during the global financial crisis.
U.S. oil is also heading for the same milestone with its April-June loss at nearly 23 percent.
The 19-commodity benchmark, Reuters Jefferies CRB index <.CRB>, is on track for a fourth straight month of decline, its longest losing streak since mid-2008 to early 2009 when it fell for eight months straight.
For the quarter, it may be the worst for the CRB index since the last quarter of 2008.
Gold has lost around 6 percent for the quarter, on course for its biggest quarterly drop since 2004.
The precious metal has gone the way of riskier assets for the most part of this year, losing out to the U.S. dollar and bonds which investors deemed safer.
But some analysts say gold can recover its shine in the second half, and could match last year’s high, which was a record.
“In the long run we’re still bullish on gold. It’s still likely to hit last year’s high of $1,920. The global economy is not doing well and we expect safe-haven demand to be back for gold,” said Lynette Tan, an analyst at Phillip Futures.
Copper rose 2.2 percent to $7,545, in what is its largest daily gain since April 12. Copper is down more than 10 percent for the quarter, its first decline in three quarters.
New-crop December corn rose for a fifth time in six sessions, and is poised for a record weekly gain of over 15 percent and a monthly increase of 22 percent after baking U.S. Midwest weather ignited a market rally.
There is a risk that Friday’s rally may not be sustained, with the demand outlook for raw materials staying dim, and investors still waiting for top commodity importer China to launch more measures to stimulate its slowing economy.
“It’s going to be a pretty bumpy ride in the second half. The underlying demand story is not very compelling at this juncture,” said Varathan at Mizuho Corporate Bank.

Source: Reuters

Comments are closed.