Written by Sumit Roy  |

October 04, 2011

Morning Call: Brent Falls Below $100, Gold ($1651) Edges Lower Amid Greece Default Fears

Details

More bearish price action hits commodities in early Tuesday trading.

IN TODAY'S HEADLINES ...

• Greece default worries are pressuring risk assets across the board today. The S&P 500 is indicated to open well below the 1100 support level, suggesting that the global sell-off may have entered a second, more significant phase. It will be very telling to see where the stock index settles at the end of the session.
  
  The next €8 billion tranche of aid for Greece has been delayed until November, as EU and IMF policymakers contemplate adjusting the details of the bailout so the private sector holders of Greek debt contribute more (and thus take bigger write-downs). Over the weekend, Greece said that its deficit would be larger than expected amid a deeper-than-expected recession in the economy.
  
  Despite the persistent worries about Greece, Italian and Spanish interest rates have been fairly stable over the past week. Ten-year bond yields in the respective countries were last down 3 basis points and 1 basis point to 5.51 percent and 5.12 percent. Meanwhile, the U.S. Dollar Index was up 0.35 percent to 79.71 — near nine-month highs.
  Eurozone considers making banks pay more for Greece
  
  
• Unlike Monday, gold and silver haven't been able to capitalize on Europe concerns today. Though the pair is outperforming, if stocks and other commodities experience another round of liquidation, we could see gold and silver tumble also as investors panic. Gold was last trading $7.50, or 0.45 percent, lower to $1650.82/oz, silver was flat at $30.41, and platinum fell by $27.45, or 1.82 percent, to $1479.55.
  GFMS: Gold Miners Add Hedges in 2Q, Set To Hedge On Year
  
  
• Crude oil is down today, with WTI trading at the lowest levels in 13 months. The benchmark was last trading lower by $2.45, or 3.16 percent, to $75.16/bbl. Brent was last trading below the key $100 support level at $99.59, down $2.12, or 2.08 percent.
  
  Goldman Sachs sees Brent averaging $120 next year, down from its prior forecast of $130.
  Commodities May Rally 20% on Emerging Markets Growth, Goldman Sachs Says
  
  
• After staging a late-day bounce in Monday's session, grain prices are back down today as traders refocus on last week's bearish inventory data from the USDA. "There's only one big fundamental in the room, and it's the lingering fears from the Sept. 30 [USDA] report," said Christopher Gadd, an analyst at Macquarie Group. "People are factoring that into the market." Corn was last trading down $0.12, or 1.98 percent, to $5.81/bushel, soybeans fell $0.14, or 1.17 percent, to $11.64, and wheat shed $0.10, or 1.53 percent, to $6.10.
  Corn, Wheat Drop on Larger Stockpiles, Weakening Demand for US Exports
  
  
• Copper fell by $150, or 2.1 percent, to $6840/mt on the London Metal Exchange. That leaves the industrial metal near 14-month lows. "There is some opportunistic restocking demand coming out of China ... But it's not as enthusiastic as it might have been if circumstances were different," said Nic Brown, head of commodities research at Natixis.
  
  Meanwhile, Goldman Sachs cut its 2012 copper price forecast to $9200/mt from $10790, though that still leaves it well above current prices.
  Copper slips on demand worries, strong dollar
  
  What to Watch For:
  
  10:00 a.m. EDT: Factory Orders (August)
  
  1:30 p.m. EDT: API Statistical Summary