COMMODITIES- Markets up, rebound from rout on US jobs data

Thursday January 06, 2011 09:26:19 AM GMT

* Prices jump as US private jobs data beats forecast

* CRB back on upward climb towards 27-month high

* Rebound shows dollar’s eroding influence on commods (Recasts; updates prices, market activity)

By Barani Krishnan

NEW YORK, Jan 5 (Reuters) – Strong U.S. jobs data ignited a broad commodities rebound on Wednesday, a day after prices fell their most in seven weeks.

A report showing three times more hiring than forecast for U.S. private sector jobs boosted prices of oil, metals and grains at midday after all fell in early trade as the dollar strengthened and Tuesday’s profit-taking retreat carried over.

Analysts said optimism that the U.S. economy was recovering more quickly than thought boosted the demand outlook for commodities, which finished 2010 as the top asset class.

“What’s happening now is the global economic recovery story has become just as important as the dollar story, if not more,” said Adam Sarhan at Sarhan Capital in New York. “That’s the shift we’re starting to see now.”

The Reuters-Jefferies CRB index, a global commodities benchmark, was up 0.7 percent by 1:30 p.m. EST (1830 GMT), moving toward the 27-month high hit early this week.

Gains in soybeans, sugar, crude oil and copper led the index higher a day after the CRB fell 2 percent, its biggest daily decline since mid-November.

The rebound came despite continued strength in the dollar, whose influence on commodities has eroded because investors are focused on fundamentals and the outlook for growth in 2011.

ADP Employer Services reported growth of nearly 300,000 private sector jobs in December, triple the forecast for 100,000 new jobs. Other data showed The U.S. services sector grew last month at its quickest pace since mid-2006.

Investors will watch government data due on Friday for confirmation of the improving jobs picture.

The data put the dollar on pace for its biggest one-day gain against the yen in more than three months and its biggest increase against the euro in more than two weeks.

The dollar has traditionally had an inverse relationship with commodities as its strength raises the cost of raw materials. Gold is often the one commodity that bucks the trend as investors see it more as a hedge against inflation.

But even gold prices bounced up off their lows as the precious metal traded more in sync with the broader market than as a stand-alone safe haven.

While economic data dominated the day, fundamental factors also supported various markets. Floods in Australis hurt the wheat crop, boosting grains. The U.S. government reported that crude inventories fell more than forecast in the final week of 2010, which lifted oil prices. Dry weather in Argentina cast doubt on the soybean and corn harvests, boosting prices.

On the Chicago Board of Trade, soybeans surged about 2 percent to a session high of $13.87 a bushel, pulling corn and wheat higher too.

On the New York Mercantile Exchange, crude oil rose over 1 percent to return above the key $90 per barrel mark.

Also on NYMEX, copper climbed 1 percent to a session peak above $4.41 per lb. (Additional reporting by Nick Trevethan in Singapore; Editing by David Gregorio)

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