Commodity Blog

Posts Tagged ‘Standard & Poor’s’

Commodities advanced today as German economic confidence improved, while China’s economic growth slowed, spurring speculation about stimulus. Oil, corn and soybeans were among gainers.

China’s gross domestic product increased 8.9 percent in the fourth quarter of 2011, following the 9.1 percent expansion in the third quarter. That was the slowest growth in 10 quarters. The report fueled talks that the country will perform measures to stimulate economic growth.

ZEW Economic Sentiment for Germany increased from -53.8 to -56.1 (month-on-month) in January, the highest level since July 2011. Economic expectations for the eurozone improved to -32.5 this month from -54.1 in the month before.

Standard & Poor’s downgraded credit ratings of several European countries on January 13. Markets were downbeat somewhat after the action, but quickly recovered as such move was expected and generally priced in.

February futures for delivery of crude oil advanced $2.01 (2 percent) to $100.71 per barrel on NYMEX. Brent oil rose from $111.42 to $111.57 per barrel as of 23:54 GMT today on ICE. Corn price was higher from $6.0125 to $6.0600 per bushel on CBoT today, while soybeans rallied from $11.6300 to $11.8275 per bushel.

Copper fell today as Standard & Poor’s warned that it put the credit ratings of 15 countries of the Eurozone on review with negative implications. The rating agency provided various reasons for such decision, including the indecisiveness of the European policy makers and the growing risk of a new recession. The announcement wiped out the positive sentiment from markets.

And the market sentiment was positive earlier. France’s and Germany’s leaders has met to discuss the possible changes to the European Union treaties, aiming for stronger fiscal integration. Such talks made way to hopes that the summit on December 9 will bring some solid plans to resolve the Eurozone debt crisis. But the prospects for the European credit ratings downgrade erased the optimism.

Copper price was down today from $3.5400 to $3.5135 per pound as of 1:44 GMT on COMEX. The metal was up from $3.6000 to $3.6200 per pound yesterday before falling to the closing price of $3.5440.

Both gold and copper was down yesterday and up today. But outlook for gold is bullish, while prospects for copper are not so good. The main reason for such different expectations is the situation in Europe that may increase demand for gold as a safe haven, but will certainly have negative impact on copper.

The European Commission released its growth forecast yesterday and it wasn’t optimistic. Gross domestic product of the European Union and the Eurozone is expected to grow only 0.5 percent. What made the Commission to look in the future with pessimism? The explanation was:

Three main risks are identified as weighing on the EU and the euro area economy: continued sovereign-debt-related uncertainty, the weakness of the financial industry and the sluggish world trade. There is a possibility of negative dynamics: slower growth could affect sovereign debtors and this, in turn, could deteriorate the condition of the financial sector, which would be unable to support growth.

Yesterday, Standard and Poor’s sent a message that France’s credit rating was downgraded, but later announced that was a mistake and the nation stays with its top AAA rating and stable outlook.

Gold traded at $1,768.20 per ounce today as of 3:31 GMT on COMEX after falling yesterday from $1,771.0 to $1,759.60. Copper spot price was $3.3695 per pound today, following the drop from $3.5640 to $3.3910 per pound on the previous trading session.

Fundamentals weren’t good for oil, making prices to go down. Among the negative factors were the increase of the US stockpiles and the downgrade of Spain’s credit rating by Standard & Poor’s.

US oil inventories increased by 1.3 million barrels to 337.6 million barrels from a week ago. The average level for crude oil refinery inputs was 14.5 million barrels per day during last week ending October 7, 563 thousand barrels per day less compared to the previous week’s average.

S&P cut the long-term rating on the Kingdom of Spain to AA- from AA and set the outlook to negative. The downgrade of Spain refueled the fears that the credit crisis would spread across the European Union. The problems in Europe can slow the global economic recovery, reducing demand for oil.

November futures for delivery of crude for fell $0.46 to $83.77 per barrel in electronic trading on NYMEX before trading at $84.01. Brent crude traded at $111.30 per barrel as of 1:46 GMT on ICE after it went down from $111.25 to $111.17 yesterday.

Most commodities declined today, reacting to the downgrade of the US credit rating by Standard & Poor’s on Friday, while gold posted a new record, rising above $1,700.

All three major agencies (Moody’s Investor Service, Fitch Ratings and Standard & Poor’s) signaled about possible downgrade of the US credit rating in the future, while S&P actually cut the rating one step to AA+ and kept the outlook on ”negative”. This move erased any optimism that had remained on markets and caused a drop of most commodities. Gold, on the other hand, took its chance and jumped to yet another record.

The MSCI All-Country World Index of stocks dropped 1.1 percent. The S&P GSCI index of 24 commodities fell as much as 2.8 percent.

December futures for delivery of gold gained $49.90 (3 percent) to $1,701.70 per ounce as of 9:06 on COMEX after earlier it reached the all-time high of $1,718.20. Futures for delivery of corn in December fell 14 cents (2 percent) to $6.8775 per bushel at 10:16 on CBoT. Contract for delivery of soybeans in November went down $0.2025 (1.5 percent) to $13.1575 per bushel. September contract for for delivery of crude oil slipped as much as $3.28 (3.8 percent) to $83.60 per barrel by 11:43 on NYMEX.

Wheat fell today on the speculation that importers would turn from US and European supplies to exports from Russia. First Deputy Prime Minister Viktor Zubkov said yesterday that Russia’s output may total 90 million metric tons this year, while exports would reach 1.5 million tons in July. Prime Minister Vladimir Putin predicted last month that production would total 85 million tons. September futures for delivery wheat dropped $0.0575 (0.8 percent) to $7.0125 per bushel at 13:15 on CBoT.

Gold capped the longest rally since November 2009 today on concerns about the debt problems in the US and Europe. Standard & Poor’s warned that it may cut the US credit rating. Eight banks failed the stress test of the European Union banks. August futures for gold delivery gained $0.8 to $1,590.10 as of 13:37 on COMEX, reaching a new all-time record.

Concerns about the European debt crisis had a great impact on markets at the start of this week. Crude oil fell on anticipation of lower demand, while gold climbed as demand for safe assets increased.

Standard and Poor’s downgraded outlook for Italy’s credit rating. Earlier Fitch Ratings cut the rating of Greece. Portugal, Ireland and Spain also cause concern. And as if that wasn’t enough, the macroeconomic data signaled about weaker performance of European Union’s economy.

July contract for crude oil delivery fell $2.40 to $97.70 per barrel on NYMEX. June contract for delivery of gold added $6.50 (0.4 percent) to $1,515.40 per ounce by 13:39 on COMEX.

Commodities rallied today as falling dollar increased demand for alternative assets. The US currency fell 0.4 percent versus the basket of six major currencies. Gains of stocks also made traders look more favorable on commodity market.

The S&P 500 Index rose 0.5 percent to 1,348.08 by 13:20, following the drop by 0.8 percent. The Dow Jones Industrial Average advanced 0.5 percent to 12,695.12 after it dropped 0.7 percent earlier today. The Thomson Reuters/Jefferies CRB Index of 19 raw materials also gained, while the MSCI World Index of equities.

June contract for crude oil delivery rose $0.76 to $98.97 per barrel on NYMEX. Futures for delivery of corn in July advanced $0.0325 (0.5 percent) to $6.805 per bushel by 13:15 on CBoT. Contract for soybean delivery in July climbed $0.11 (0.8 percent) to $13.4275 per bushel. June futures for delivery of gold gained $5.40 (0.4 percent) to $1,506.80 as of 13:41 on COMEX. July futures for silver delivery dropped $0.718 (2 percent) to $34.797 per ounce.

Silver rebounded yesterday and continued to recover from the previous sharp drop today after Standard and Poor’s downgraded Greece’s credit rating, fueling “safe haven demand” for precious metals. S&P lowered yesterday its long- and short-term sovereign credit ratings of Greece to B and C from BB- and B, respectively. The rating agency wrote:

The downgrade reflects our view of increasing sentiment among Greece’s key eurozone official creditors to extend the debt payment maturities of their €80 billion of bilateral loans pooled by the European Commission. As part of such an extension, we believe the eurozone creditor governments would likely seek “comparability of treatment” from commercial creditors in the form of their similarly extending bond and loan maturities.

S&P also said that “a rescheduling of official debt that left commercial debt untouched would not constitute a default under our criteria but would likely signal declining creditworthiness”, suggesting that more rating reductions may follow.

Silver dropped sharply last week as COMEX increased margin requirements to hold positions on the metal. This decline was expected to be short-lived because the slump was too big for such short period of time and as fundamentals, that have pushed silver to its recent highs, haven’t changed.

Silver futures climbed as much as 2.1 percent to $37.90 per ounce before trading at $37.58 in Singapore. The metal tumbled 27 percent last week.

Gold and crude oil extended the rally today as the dollar continues to weaken. The US currency still feels the impact of the downward revision of the US credit rating outlook by Standard & Poor’s, even after the macroeconomic data showed that the US economic recovery goes forward with good pace. The Dollar Index fell 1 percent to 74.272, the lowest level since December 1, 2009.

Gold and other precious metals also gained as the rising prices across the world increases demand for a hedge against inflation. Crude oil was bolstered by the signs of the global recovery. It’s interesting to see how quickly demand for commodities returned after it was weakened by concerns about the European debt crisis. Anyway, commodities are in favor again, as was shown by the Thomson Reuters/Jefferies CRB Index of 19 commodities, which jumped as much as 1.7 percent.

June futures for gold delivery gained $3.80 (0.3 percent) to $1,498.90 by 13:37 on COMEX in New York, while contract for immediate delivery of the precious metal jumped 0.6 percent to the record of $1,506.03 per ounce in London. June futures for crude oil delivery rose $3.17 to $111.45 per barrel on NYMEX, posting the biggest gain since March 17.