September 1, 2009 / 7:47 AM / 11 years ago

COMMODITIES-Steadier after sell-off; LME copper catches up

* Oil, gold reverse pvs losses; China equities lift mood

* LME copper weaker after holiday; plays catch up

* Worries persist Beijing efforts to cool economy will hamper demand

By Nick Trevethan

SINGAPORE, Sept 1 (Reuters) - Commodity markets got off to steadier start to the new month on Tuesday, as a sell-off in the previous session gave way to cautious optimism after equity markets stabilised on supportive Chinese manufacturing data.

But the reprieve, which also stemmed from longer term investment fund buying, may be short-lived if Beijing, worried about the surge in commodity markets this year, continues its attempts to cool the sector.

With prices of oil, copper and lead all up 100 percent since the early part of 2009 and many other industrial raw materials up by double-digit percentages, except for grains, China may be trying to take some of the heat out of markets.

“Beijing is a bit concerned about high commodity prices so they are rattling the cage so speculators rethink their investment strategies,” said Jonathan Barratt, managing director of Commodity Broking Services.

“But to push things lower we need shocks and the moves in Chinese equities provide just that.”

Shanghai's benchmark index .SSEC fell almost 7 percent to a three-month closing low on Monday, stirring fears about China's ability to lead an economic recovery and denting sentiment across commodities. [ID:nBJD002975]

But on Tuesday the market stabilised, trading 0.6 percent higher, lifted by positive purchasing manager data.

“The Chinese equity market is holding up, relieving some of the market’s recent concerns. The Chinese PMI number also looked reasonably positive and is helping put a bottom under metals,” said David Moore, commodities strategist at Commonwealth Bank.

China’s official purchasing managers’ index (PMI) for August rose to 54.0 from 53.3 in July, the China Federation of Logistics and Purchasing (CFLP) said. It was the sixth straight month that the official PMI has stood above the boom-bust line of 50. [ID:nBJC000453]

But HSBC’s China Purchasing Managers’ Index (PMI) showed a bigger rise in August, to a 16-month high of 55.1, from 52.8 in July, as a jump in both output and new orders underscored signs of a recovery. [ID:nBJB000652]

More PMI data from the Euro zone, forecast at 47.9 due at 0358 GMT, will also be closely watched, as well as a raft of U.S. data on housing, retail and auto sales. ECON

London Metal Exchange copper for delivery in three months MCU3 fell $131 a tonne to $6,344 by 0654 GMT, after a 3 percent slide in Shanghai metal and a 4.2 percent decline in COMEX copper HGZ9 while London markets were shut on Monday for a holiday.

On a monthly basis copper prices rose almost 7 percent in New York in August, making the market the second strongest after sugar in the 19-commodity Reuters-Jefferies CRB index .CRB.

For a graphic of how the CRB performed last month, click: here

London copper saw a 13 percent rise last month and Shanghai futures gained 9 percent.

Strong demand in India pushed raw sugar futures through key resistance at 24 cents a lb in early trading, their highest price level in nearly 30 years, on Monday. SBV9

“Speculators have too much weight in some of these markets,” Barratt said.

“Look at sugar — OK, the fundamentals are good but it’s run on way ahead of itself. When we see a change in those fundamentals a circuit breaker will trip and it’s lights out.”

U.S. crude for October delivery CLc1 rose 33 cents to $70.29 a barrel, after falling 3.8 percent on Monday.

The release of a key gauge of U.S. manufacturing activity in August and weekly crude inventory data later in the day, both of which are expected to show a gradual rebound in the U.S. economy and oil consumption, will set the trading tone for the market.

Spot gold XAU= rose 0.4 percent to $954.45 an ounce from New York’s notional close of $949.65, but off a three-week high of $961.00 marked on Aug. 28.

In August, gold was mostly caught in a narrow range, falling 0.4 percent. It has been wedged within around $20 of the $950 mark since mid-July.

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