Written by Sumit Roy  |

August 09, 2012

Morning Call: Oil Rises As China Data Spur Stimulus Hopes, Gold Holds Above $1610, Corn Near Records

Details

Weak China data influences today's trading action.

A batch of weaker-than-expected economic data from China is leading to mixed action in commodity markets. Industrial production growth in the country slowed from 9.5 to 9.2 percent in July, the slowest rate since April 2009. Growth in retail sales slowed from 13.7 percent to 13.1 percent in July, the slowest rate since February 2011.

On the one hand, slowing growth is bearish, as it reduces China's appetite for commodities. However, it also compels the government to do more to support the economy through stimulus and the easing of monetary policy, which could boost growth down the line.

China's consumer price index grew by only 1.8 percent year-over-year in July—the slowest rate since January 2010—giving the People's Bank of China ample room to cut interest rates without fear of stoking high inflation.

Meanwhile, in Europe, Spanish 10-year bond yields were last trading up by 1 basis point to 6.88 percent.

The U.S. Dollar Index rose by 0.29 percent to 82.63.

• Gold was last trading up by $0.42, or 0.03 percent, to $1612.55, while silver edged down by $0.03, or 0.1 percent, to $28.02.
  
  Platinum added $2.99, or 0.21 percent, to $1412.24 and palladium fell by $1.45, or 0.25 percent, to $585.80.
  
  "Gold seems to have gotten a foothold above the $1,600 level and seems to be relatively stable," Societe Generale Analyst Robin Bhar said. "It's still showing this correlation to riskier assets. We've seen a bit of a rally in the oil market and equities, and gold has kept a par with those moves."
  Gold steadies above $1610 per oz as euro extends losses
  
  
• Crude oil is slightly higher and remains near three-month highs. Brent was last trading up by $0.20, or 0.18 percent, to $112.34, while WTI rose by $0.26, or 0.28 percent, to $93.61.
  
  "The general mood is bullish – any dip is still being used as a buying opportunity," said Carsten Fritsch, an energy analyst at Commerzbank.
  
  "Given the supply risk, with falling North Sea output and the closure of three oil ports in Mexico, all this should lend support to prices," he added.
  Oil steady, supported by shorter supply
  
  
• Natural gas was last trading down by $0.04, or 1.47 percent, to $2.89/mmbtu. Today's inventory report from the EIA may show that storage rose by 27 to 31 billion cubic feet per day last week, according to a survey of analysts by Platts.
  Ahead of the Bell: Natural gas supplies
  
  
• Corn is back near record highs today ahead of the USDA's latest supply and demand forecasts on Friday. The grain was last trading up by $0.08, or 1.02 percent, to $8.19/bushel, while soybeans rose by $0.13, or 0.81 percent, to $16.43 and wheat rose by $0.07, or 0.72 percent, to $9.06.
  
  "I think general price firmness is being seen in ahead of the USDA report because the market is increasingly realizing how horrible conditions are for U.S. corn," said Rabobank Analyst Erin FitzPatrick.
  
  "There is pre-positioning ahead of the report as people are expecting more cuts in U.S. harvest forecasts. Despite recent rain in the U.S., a lot of the damage has already been done to corn," she added.
  Soybeans, corn, wheat rise again, USDA report eyed
  
  
• Copper was last trading down by $0.01, or 0.19 percent on Comex.
  
  "The Chinese data overnight has increased hopes for further stimulus. Inflationary pressure continues to ease but the economy remains soft," said Guy Wolf, macro strategist at Marex Spectron.
  Copper falls on dollar, China stimulus hopes limit losses
  
  

What to Watch For:

8:30 a.m. ET: Initial Jobless Claims

10:30 a.m. ET: Weekly Natural Gas Storage Report