By Chris Flood
Published: January 26 2010 12:28 | Last updated: January 26 2010 12:28
Commodity markets staged a broad retreat on Tuesday on uncertainty about the outlook for demand from China after Beijing enforced tighter monetary policy by ordering some banks to immediately raise their reserve requirements.
Oil and base metals fell on concerns that the Chinese government might step up its efforts to cub lending growth to prevent the country’s economy from overheating.
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In energy markets, Nymex March West Texas Intermediate fell 80 cents to $74.46, surrendering the recovery made in the previous ession.
ICE March Brent lost 69 cents at $73 a barrel.
“The oil market will face ongoing pressure from President Obama’s bank regulation plans and expectations that the Chinese will continue to tighten monetary policy in order to avoid an over-heating economy,” said Tom Pawliki of MF Global.
Base metals moved lower, with copper down 1.3 per cent to $7,360 a tonne while aluminium slipped 0.8 per cent to $2,224 a tonne.
“Given the significant price gains over the past year, and the fact LME stocks have been rising at the same time, it is not in itself surprising to see some meaningful corrections getting underway at this time,” said one senior dealer.
Another trader said that although short-term momentum players were unwinding some of positions, there were also increasing signs of restocking by consumers and merchants in both Europe and the US.
Gold traded below the $1,100 mark at $1,089.85 a troy ounce after ending Monday’s session in New York at $1,097.85.
Sugar prices bucked the weakness elsewhere in commodity markets amid ongoing concerns that importing nations could find themselves unable to secure supplies after a disappointing end to this year’s harvest in Brazil, the world’s largest sugar producer.
In London, Liffe March white sugar traded 0.9 per cent higher at $760 a tonne after reaching a record $767 last week.
In New York, ICE March raw sugar inched up 0.2 per cent to 29.87 cents a pound after breaching the 30 cents a pound mark for the first time in 29 years in Monday’s session.
