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February 10th, 2012
Futures Trading – Copper traders turned bullish for the first time in seven weeks on mounting confidence that global growth will strengthen, diminishing stockpiles after a year in which mine production fell by a record amount.
Thirteen of 25 analysts surveyed by Bloomberg expect the metal to gain next week and three were neutral. Hedge funds and other money managers are holding their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Inventories tracked by the London Metal Exchange are already at a two-year low after global mine output dropped by 200,000 metric tons in 2011, Barclays Capital estimates.
Investments (.CMDOI) in commodities expanded at the quickest pace in six years in January on increasing confidence economies will skirt another recession, data compiled by Bloomberg show. Higher demand comes at a time when producers are struggling to keep up, as lower ore grades, strikes and slower-than-expected mine developments limit supply growth. Barclays anticipates a third consecutive copper shortage in 2012 and another one next year.
“Copper is always a forward looking indicator of where the economy is going to be,” said Dan Smith, an analyst at Standard Chartered Plc in London. “Things are improving in the financial markets, people are becoming more bullish.”
The metal rose 14 percent to $8,673.50 a metric ton this year on the London Metal Exchange, the best start since 2008. The Standard & Poor’s GSCI gauge of 24 commodities added 4.8 percent and MSCI All-Country World Index (MXWD) of equities gained 8.9 percent, entering a bull market from its October low. Treasuries lost 0.6 percent, a Bank of America Corp. index (MXWD) shows.
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Wheat futures gained for the first time in three sessions on speculation that cold weather in France, Germany and Ukraine will damage dormant crops.
Temperatures reached minus 15 degrees Celsius (5 degrees Fahrenheit) in France’s Alsace and Lorraine regions yesterday, according to forecaster Meteo France. In northern Germany, where some fields lack a protective layer of snow, soil temperatures have dropped below minus 8 degrees Celsius, Deutscher Wetterdienst said. Cold weather in the Black Sea region also has hurt crops.
“There’s been a lot of talk about the cold in Europe and in Russia and Ukraine,” Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas, said in a telephone interview. “Traders still remember two years ago when everything was OK, then they had a terrible harvest. They remember how much any loss to production can mean to prices if it comes out of Europe and the Black Sea area.”
Wheat futures for March delivery gained 1.2 percent to close at $6.685 a bushel at 1:15 p.m. on the Chicago Board of Trade. The price, down 2 percent in the previous two sessions, has dropped 22 percent in the past 12 months.
Ukraine, the biggest grain grower in the Black Sea region after Russia, will need to replant at least half of its winter crops after freezing weather this week, Tetiana Adamenko, the head of agro-meteorology at the country’s national weather center, said on Feb. 3.
Damage known as winter kill caused by freezing weather will probably be average as snow cover protected some plants in parts of Bulgaria, where temperatures fell below minus 30 degrees Celsius, FCStone said in a report today.
The outlook for European soft wheat remains positive, and “there is little reason to believe that from a European perspective it will be greater than seasonal averages,” said Jaime Nolan-Miralles, an FCStone risk analyst.
- Tony C. Dreibus in London at Bloomberg.