"Handshake across the Himalayas"
India and China will study new ways to ease tensions along their ill-defined border, Chinese Premier Li Keqiang said on Monday in his first foreign trip since taking office, which comes just weeks after a military stand-off between the Asian giants in the Himalayas. Full Article | Slideshow
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COMMODITIES-Oil rises on Mideast; gold and metals down
* Oil up on Middle East tensions
* Gold gives up early gains; eyes on dollar
* London copper down; Shanghai metals rally seen short-lived
By Sambit Mohanty
SINGAPORE, Jan 5 (Reuters) - Oil and gold surged 3 percent and 1 percent respectively on Monday, before giving up early gains, as investors snapped up safe haven assets following Israel's offensive against Hamas militants in the Gaza Strip.
Crude found support from an Iranian military commander's call for an oil boycott over Israel's offensive, a Russian gas supply row and evidence of OPEC's compliance with output cuts, while gold traders watched the dollar, which held near a three-week high against the yen.
Asian stocks hit a two-month high on Monday and some currencies rose, with investors betting the global economy will start to recover later this year. Traders expect geopolitical risks to support prices of commodities .CRB, which have gained about 10 percent since Christmas.
Copper on the London Metal Exchange was down more than 1.5 percent, although Shanghai copper and zinc futures stormed 6 percent higher on their first trading day of the New Year, chasing sharp gains in London on Friday. Grains fell more than 1 on demand woes as traders feared the market had been overbought.
U.S. crude for February delivery CLG9 was up 85 cents a barrel at $47.19 by 0521 GMT, but off an earlier high of $48.68. Some traders are beginning to reckon that the slump of more than $110 from a $147 record high last July has been overdone.
"The Gaza conflict added to the geopolitical risk premium...in the oil price," Commonwealth Bank of Australia analyst David Moore said in a note. "Oil markets may also have a sense that the implementation of earlier announced production cuts by OPEC countries will ultimately tighten oil supplies."
Israeli troops and tanks split the Gaza Strip and ringed its main city on Sunday in an offensive against Hamas that has killed 500 Palestinians, including a growing number of civilians.
An Iranian military commander has called on Islamic countries to cut oil exports to Israel's supporters in response to the offensive in Gaza, the official IRNA news agency reported on Sunday. [ID:nDAH458420]
In the precious metals market, spot gold XAU= touched a high of $883.55 an ounce at one stage, but failed to top last Monday's 12-week peak of $889.55. By 0521 GMT, cash gold stood at $869.35 per ounce, down 0.4 percent from New York's notional close of $873.20.
But gold could resume its rally as investor risk appetite will probably stay high, given hopes of a fresh economic stimulus package from U.S. President-elect Barack Obama, supporting company shares as well as gold, said Yuki Sonoda, adviser at Tokyo-based Daiichi Commodities Co..
"Strong expectations for Obama will keep supporting company shares as well as gold at least until he takes office on Jan. 20," he added.
METALS AND GRAINS
Metals futures in China rose sharply, but analysts said the rallies could be a false dawn and just the first of a series of short-lived rallies.
Shanghai's benchmark third month copper contract SCFc3 jumped 6 percent or 1,400 yuan from its settlement on Dec 31 to 24,810 yuan ($3,637) per tonne, after London Metal Exchange futures MCU3 jumped 5.6 percent on Friday to $3,231. On Monday, LME copper fell 1.7 percent to trade at $3,175.
"This feels like a false rally. Commodities will gain strength and may come out of the downturn quicker than equities but not perhaps until the second half," ANZ's senior commodities analyst, Mark Pervan, said.
"The next set of data will cool down the party -- we have U.S. payrolls on Friday, which will be pretty awful, as well as auto sales, factory orders and of course the the start of the reporting season looms. All of that means more surprises are likely on the downside."
U.S. corn futures fell nearly 1.5 percent as demand worries punctured a strong rise in prices seen last month. Soybean futures also dropped, but robust demand from China, the world's biggest importer, limited losses.
"If you look at the technicals, the positions are a bit overbought at the moment and that is probably why we are seeing a bit of weakness," said Doug Whitehead, a soft commodity strategist at Australia & New Zealand Banking Group Ltd.
"We are seeing some traders take profit at the moment. There is still some serious demand concerns for corn."
Chicago Board of Trade March corn CH9 fell 1.5 percent to $4.06 per bushel by 0522 GMT. Soybeans for January delivery SF9 fell 0.4 percent to $9.66 per bushel, while March wheat WH9 dropped 1.5 percent to 6.02 per bushel. (Additional reporting by Nick Trevethan, Jennifer Tan and Naveen Thukral in Singapore, and Risa Maeda in Tokyo)
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