Written by Sumit Roy  |

September 01, 2011

Morning Call: Commodities Fall After Weak China, European Manufacturing Data; Gold At $1823, Silver Hits $41.60

Details

Weak manufacturing data from China and Europe pressure commodities, with similar data from the U.S. set to be released soon.

IN TODAY'S HEADLINES ...

• Commodities are flat to lower this morning, as economic concerns resurfaced following some weak data from around the world. China's PMI Manufacturing for August rose slightly to 50.9 from 50.7, remaining just above the 50 threshold that represents expansion in the manufacturing sector. Germany's PMI Manufacturing also came in at 50.9, down from 52 in July, and is now at the lowest level since September 2009.
  
  A similar gauge for the U.S. — the ISM Manufacturing Index — will be released at 10 a.m. EDT and is expected to show contraction in the country's manufacturing sector. The consensus estimate is calling for a 48.5 reading, down from 50.9 in July. That would be the lowest figure since June 2009.
  Commodities Decline on Speculation Slower Economic Growth Will Curb Demand
  
  
• Precious metals are treading water, with gold last trading down $2.50, or 0.14 percent, to $1823.22/oz. Silver gained $0.04, or 0.1 percent, to $41.60 and platinum was flat at $1846. Today's ISM Manufacturing data and Friday's U.S. employment report may be a driver of prices. Weaker data may be seen as bullish, as traders speculate that additional monetary stimulus is more likely, while stronger data may have the opposite effect.
  Gold Drops for a Second Day as Strengthening Dollar Curbs Investor Demand
  
  
• Modest profit-taking is hitting crude oil this morning. Brent last traded $0.49, or 0.43 percent, lower at $114.36/bbl, while WTI fell fractionally to $88.80. As we wrote in Wednesday's Petroleum Report, though oil has rebounded significantly from August's lows, the risks for prices remain to the upside as the market grapples with a tight supply and demand balance amid ongoing supply disruptions in Libya. But day-to-day, expect prices to take their cues from movements in U.S. stock markets.
  Crude Oil Declines in London on Signs of Slowing Economic Recovery in U.S.
  
  
• The grain sector is a laggard again today, with corn last trading 1.29 percent lower to $7.48/bushel; soybeans down 0.76 percent to $14.38; and wheat lower by 1.04 percent to $7.38.
  
  Analysts expect data from the USDA today to show that exports of corn and soybeans fell year-over-year in the week ending Aug. 25. "USDA has already lowered its export projection," said analysts at MF Global. "In today's world it is also easier to substitute Argentine and Brazilian corn exports for U.S. exports."
  Corn, Wheat Decline on Speculation U.S. Export Demand May Slow
  
  
• Copper fell 1.5 percent to $9140/mt on the London Metal Exchange today.
  
  "It's going to be a volatile environment for the time being," said Daniel Smith, an analyst at Standard Chartered. "Obviously global growth is slowing, particularly European PMIs were not very good today. I think what is happening is that as soon as there is any good news prices rally and bad news they fall back. I think the trend is still slowly upwards but pretty volatile within that. We see there will be modest demand growth and continued supply tightness which will keep things on a slow upward trajectory."
  Copper falls on China exports, Europe factory data

What to Watch For:

8:30 a.m. EDT: U.S. Initial Jobless Claims

10:00 a.m. EDT: U.S. ISM Manufacturing (August)

10:00 a.m. EDT: U.S. Construction Spending (July)

10:30 a.m. EDT: EIA Weekly Natural Gas Storage Report