Commodities rocked as US economy creates zero jobs

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Commodity markets were hit this week by shock news that the United States created no jobs in August, sparking speculation that the world's biggest economy could be heading for a double-dip recession.

Analysts said the data bolstered expectations that the US Federal Reserve could soon decide to implement another round of quantitative easing -- dubbed QE3 by traders -- to help breathe new life into the struggling economy.

"This report raises renewed fears of a double-dip recession in the United States and the prospect of further Fed stimulus measures, with the market now factoring in ... action at the next (Fed) meeting in September," said CMC Markets analyst Michael Hewson.

Employment in the private sector, which has been the main engine for job growth as revenue-strapped governments shed workers, "changed little" in most major industries, the Labor Department said.

The total of 17,000 private-sector jobs added were offset by 17,000 shed by government, while the unemployment rate remained at 9.1 percent from July.

"The net-zero figure for jobs creation ... pressured commodity prices," said Sucden analyst Brenda Sullivan.

"However, with President Obama due to speak next week on jobs and reports that advisors are suggesting bold moves, this particular issue may have some light to come.

"Furthermore, the Fed's announcement on September 21 is increasingly expected to address more easing measures or stimulative ideas."

OIL: The market edged higher as traders balanced hurricane concerns and ongoing economic gloom in top crude consuming nation the United States.

"Prices look set to be trading in a broad range at the moment, buffeted on the one side by weakening demand fears as US economic data continues to deteriorate, while being supported slightly on fears about supply disruptions caused by the US hurricane season," Hewson of CMC Markets said.

"Talk of QE3 may also be supporting it but I doubt that further stimulus will be effective in the long term, given that the obstacles to effective measures remain high, especially on a political level for (Fed chairman Ben) Bernanke."

Bernanke had hinted last Friday that the Fed could kick off a fresh round of monetary easing in the near future.

Meanwhile, US forecasters revealed Friday that Hurricane Katia has reformed over the Atlantic, as the now-strengthening storm churned westward toward a possible collision with the US East Coast late next week.

Analysts fear that the hurricane could disrupt US energy installations.

Deutsche Bank analyst Michael Lewis predicted that commodity prices would rebound sharply in the final three months of the year -- if the world does not slide into another recession.

"Assuming the soft patch in economic activity does not evolve into a full-blown recession, we expect equity and oil prices will rally during the fourth quarter of this year."

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in October rose to $113.23 a barrel from $111.10 a week earlier.

On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for October, stood at $87.06 compared with $85.48 a week earlier.

PRECIOUS METALS: Gold jumped back toward record highs in the wake of the disappointing US data as investors sought shelter from the economic gloom.

The metal climbed as high as $1,879.88 per ounce on Friday, not too far from the record high of $1,913.50 seen the previous week.

"Gold's gains underscores its role in financial markets as a safe haven, benefiting from a flight to quality when all other asset classes decline," said Ross Norman at London bullion broker Sharps Pixley.

"Global manufacturing figures ... added to fears that the economy may once again be slowing."

Eurozone manufacturing hit reverse gear in August, tumbling to a two-year low, in a fresh sign the economy is slowing fast and US sector barely expanded for the second month running in August.

By late Friday on the London Bullion Market, gold rose to $1,875.25 an ounce from $1,788 the previous week.

Silver advanced to $42.50 an ounce from $41.06.

On the London Platinum and Palladium Market, platinum climbed to $1,873 an ounce from $1,812.

Palladium increased to $785 an ounce from $750.

BASE METALS: Base or industrial metals finished the week mostly firmer after trimming gains following the US jobs report.

By late Friday on the London Metal Exchange (LME), copper for delivery in three months firmed to $9,025 a tonne from 9,006 the previous week.

Three-month aluminium climbed to $2,427 a tonne from $2,369.

Three-month lead gained to $2,478 a tonne from $2,428.

Three-month tin increased to $23,870 a tonne from $23,700.

Three-month zinc slipped to $2,182 a tonne from $2,227.

Three-month nickel was up to $21,438 a tonne from $21,230.

COCOA: Prices eked out slender gains after a choppy trading week.

By Friday on LIFFE, London's futures exchange, cocoa for delivery in December advanced to £1,955 a tonne from £1,930 the previous week.

In New York on the NYBOT-ICE, cocoa for December increased to $3,094 a tonne from $3,058.

SUGAR: Prices lost ground following the downbeat US jobs data.

"The macro picture is not helping sugar," said Sucden analyst Nick Penney, who added that the market was also under pressure from talk of increased output in northern hemisphere producing nations.

By Friday on NYBOT-ICE, the price of unrefined sugar for delivery in October slid to 28.95 US cents a pound from 29.70 cents the previous week.

On LIFFE, the price of a tonne of white sugar for October fell to £752.30 from £780.60 the previous week.

COFFEE: Coffee enjoyed mixed fortunes but New York Arabica prices hit 290.65 cents per pound -- the highest level since May -- on stretched global supplies.

"Coffee futures continued their upward climb, hitting their highest level in three and a half months ... as the market found strength from a lack of Arabica beans and spill over support from outside markets," The Public Ledger said.

"Demand is picking up and with tight global supplies of Arabica beans, prices could continue to move higher."

By Friday on NYBOT-ICE, Arabica for delivery in December rose to 288 US cents a pound from 279 US cents the previous week.

On LIFFE, Robusta for November declined to $2,274 a tonne after $2,395 a tonne.

RUBBER: Prices rebounded amid tight raw material supplies following bad weather conditions that have been disrupting output.

The Malaysian Rubber Board's benchmark SMR20 advanced to 470.85 US cents a kilo from 454.85 US cents the previous week

© 2011 AFP

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