Singapore: Commodity investors put fears of a Dubai-fueled debt crisis and a surge in the dollar to the back of their minds on Monday as last week’s rollercoaster ride for industrial raw materials turned into a gentle undulation.
Hopes that the fallout from Dubai’s debt standstill will be limited helped Asian stocks recover from sharp falls last week, while the dollar fell 0.6% against major currencies after climbing more than 1% the previous session.
“The Dubai debt debacle is something we will keep a close eye on. After the initial shock the market is taking a fairly sanguine view. This is no Lehman Brothers -- yet,” an industrial metals dealer in Sydney said.
“But there is a worry that this may be the first in a series of rogue debt waves and if we see more, it could swamp the economic recovery.”
Analysts cautioned that sentiment remained on edge and there could be another round of corrections in the equities and commodities markets if Dubai was not able to resolve its debt woes.
Implied volatility for US crude futures, a measure of risk perception based on options, rose by 15% on Friday, the steepest jump since October 2008 after oil traded in its widest range in percent terms on Friday in seven months.
“Oil prices could be at the mercy of the renewed financial pessimism till further clarity on the Dubai situation emerges,” Barclays Capital said in a research note on Friday.
“While short forays below the recent trading range cannot be ruled out as a result of the renewed pessimism, we do not see any underlying shift in the oil market fundamentals and thus expect a return to normalcy once initial fears abate,” it said, adding that it saw $70 as the minimum support level.
In metals, three-month copper on the London Metal Exchange rose 1% to $6,920 a tonne.
On Friday, prices slumped as low as $6,620, but recovered to end the day $34 higher at $6,855.
Dubai, US jobs data, Black Friday retailers’ results and a chance for Congress to throw fireballs at Fed chief Ben Bernanke are likely to keep investors on edge for the week.
“For the last four or five months the data has mostly been more positive than expectations. It was only a matter of time before we had a reminder that we won’t have a V-shaped recovery and there are exposures yet to be unravelled,” said Ben Westmore, commodities economist at National Australia Bank.
“Many markets have paused...and investors are waiting to see how the macro data pan out.”
Spot gold eased $1 to $1,175.70 an ounce from New York’s notional close.
Bullion fell as low as $1,163.00 on Monday before paring losses and remains within about 2 percent of its record high of $1,194.90 hit last week.
“Even when gold succumbs to cashing out, it faces renewed demand on dips because of its safe-haven appeal against financial jitters,” said Hiroyuki Kikukawa, general manager in the market research department at Nihon Unicom in Tokyo.
US soyabean and wheat futures all rose more than 1%, climbing to their highest in nearly a week. Grains are on track for their biggest monthly gains since May, with wheat up nearly 13%, while corn and soybeans are heading for increases of close to 9% each.
Gold is on course for a 12.5% gain, its biggest in a year, while copper is set to end November 6.6% to the upside, its tenth monthly gain in 11 months. Oil was more or less flat on the month.