Morning markets: dog doesn't bark, to relief of crop markets

by Agrimoney.com

A dog that didn't bark proved a market mover on Monday.

And not the one that was on holiday. US financial markets are closed for the Independence Day celebrations.

Many investors had been bracing for a rise in interest rates in China... which never happened.

In failing to raise rates on Friday, China broke a trend of raising rates every other month since October. (Although there are residual fears that an increase might yet come to pass in a week's time or so.)

And borrowing costs in China are viewed as having a big factor in determing commodity buyers' willingness to splash out in a country with such a huge appetite for raw materials.

Chinese rises

That helped boost sentiment among commodity investors, as did a broadly improved financial market mood.

Tokyo's Nikkei share index crossing 10,000 points for the first time in two months although, in closing up 1.0%, it ended just below.

The dollar strengthened too – a help for raw materials in Asian markets which, being denominated in other currencies, look more competitive when the greenback appreciates.

In China, corn for January rose 0.8% to 2,282 yuan a tonne as of 07:00 GMT (08:00 UK time) on the Dalian, where soybeans for January added 0.7% to 4,433 yuan a tonne.

On the Zhengzhou exchange, cotton for January added 0.8% to 22,535 yuan a tonne.

Overtapping hangover?

In Kuala Lumpur, palm oil exploited the improved sentiment, as well as a positive close for rival vegetable oil soyoil in Chicago on Friday, to add 1.2% to 3,071 ringgit a tonne in Kuala Lumpur, for September delivery.

Crude oil, which has some bearing on commodities such as palm oil used in making biofuels, helped by adding 0.3%, for the West Texas Intermediate variety, to retake the $95-a-barrel mark.

In Tokyo, rubber added 3.8% to 378.00 yen a kilogramme for the benchmark December lot.

"Although supplies are improving after the low production season, the post-winter global supply of natural rubber has not seen a normally expected seasonal rise," Ker Chung Yang, at Phillip Futures in Singapore, said.

"According to Association of Natural Rubber Producing Countries, the post-wintering supply situation could be due to rains, damage due to overtapping of trees to take advantage of abnormally higher prices earlier in the year and ageing trees."

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