Written by Sumit Roy  |

August 09, 2012

Market Wrap: NatGas Jumps Above $3 On Inventory Report, Brent Rises Above $113 On China Stimulus Hopes

Details

Most commodities rose today.

Commodities rose broadly today, as China stimulus hopes boosted prices. Overnight, China said that 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 o 13.1 percent in July, the slowest rate since February 2011.

On the surface, 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. That's what the market focused on today.

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 down by 2 basis point to 6.85 percent.

The U.S. Dollar Index rose by 0.38 percent to 82.71.

• Gold was last trading up by $4.87, or 0.3 percent, to $1617, while silver edged up by $0.09, or 0.32 percent, to $28.14.
  
  Platinum added $4.02, or 0.29 percent, to $1413.27 and palladium fell by $0.20, or 0.03 percent, to $587.05.
  
  "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."
  
  
• Crude oil moved higher to just shy of the three-month highs set in the prior session. Brent was last trading up by $0.90, or 0.8 percent, to $113.04, while WTI rose by $0.31, or 0.33 percent, to $93.66.
  
  "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.
  
  
• Natural gas was last trading up by $0.10, or 3.41 percent, to $3.03/mmbtu after the EIA said that inventories only increased by 24 billion cubic feet last week, below the 27 to 31 bcf that analysts were expecting.
  
  
• Corn was back near record highs today, ahead of the USDA's latest supply and demand forecasts on Friday. The grain was last trading up by $0.13, or 1.6 percent, to $8.24/bushel, while soybeans rose by $0.58, or 3.56 percent, to $16.88 and wheat rose by $0.16, or 1.81 percent, to $9.16.
  
  "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.
  
  
• Copper was last trading down by $0.01, or 0.03 percent, to $3.42/lb 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.