Bloomberg News

Commodities Rise to Six-Week High on European Deal, U.S. Growth

October 27, 2011

Oct. 27 (Bloomberg) -- Commodities advanced to a six-week high, led by metals and gasoline, after European leaders agreed to expand a rescue fund designed to stem the region’s sovereign debt crisis and as the U.S. economy grew in the third quarter at the fastest pace in a year.

The Standard & Poor’s GSCI Index rose 3 percent to 657.14, the highest level since Sept. 15, as 20 of the 24 commodities tracked by the gauge climbed. Copper, which was poised for a weekly record rally, led the gains. Lead, silver, zinc and crude oil rounded out the top five movers.

European leaders persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the bailout fund to 1 trillion euros ($1.4 trillion), responding to global pressure to step up the fight against the financial crisis. Gross domestic product in the U.S. rose at a 2.5 percent annual rate in the three months through September, according to the Commerce Department.

“We are not out of the woods, and the U.S. economy is not completely recovered, but the European debt deal and the U.S. GDP number have restored some confidence,” said Jason Schenker, an Austin, Texas-based energy consultant.

Copper for delivery in three months rose 6.1 percent to close at $8,145 a metric ton ($3.69 a pound) on the London Metal Exchange. The commodity has jumped 14 percent so far this week, heading for its biggest increase since at least April 1986, according data compiled by Bloomberg.

The MSCI All-Country Index of equities surged 4.3 percent to 318.27, the highest level since Aug. 3. The Standard & Poor’s 500 Index gained 3.4 percent to 1,284.59, erasing its loss for the year. The Dow Jones Industrial Average advanced 2.9 percent to 12,208.55.

Euro Rises

The euro rose to a seven-week high against the dollar, appreciating above $1.40 for the first time since September and boosting the appeal of commodities as an alternate investment to the U.S. currency. The euro rose 2 percent to $1.4188 at 4:30 p.m. in New York.

“Commodities are likely to rally for now as the European rescue package buys some time, even if the current solution is unlikely to be a turning point in the sovereign debt crises,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “The real problem remains that growth will continue to be anemic in the industrial world and probably negative in the euro zone this quarter.”

Crude oil for December delivery on the New York Mercantile Exchange gained $3.76, or 4.2 percent, to $93.96 a barrel. Brent oil for December settlement on London’s ICE Futures Europe exchange advanced 2.9 percent to $112.08 a barrel.

Silver futures for December delivery surged 5.4 percent to $35.112 an ounce on the Comex in New York, the biggest jump since Oct. 6. The metal has climbed 13 percent this week and was poised for the largest weekly gain since September 2008.

Gold futures rose, heading for the biggest weekly gain since January 2009. Gold for December delivery increased 1.4 percent to settle at $1,747.70 an ounce on the Comex.

--With assistance from Moming Zhou in New York. Editor: Bill Banker, Dan Stets

To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Catherine Airlie in London at cairlie@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net; Stephen Voss at sev@bloomberg.net


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