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Worries about EU's financial health send commodities tumbling

By Michael Bellart  (Global Times)

08:02, June 13, 2012

Monday's commodities rally petered out Tuesday as domestic futures fell across the board as investors took a critical look at the Spanish bank bailout, as well as Europe's other unresolved problems.

The most active copper contract on the Shanghai Futures Exchange (SHFE) fell 1.12 percent to close at 53,740 yuan ($8,435.65) per ton. The contract managed to recover a bit after taking an opening loss of 1.34 percent, tracking copper futures on the London Metal Exchange (LME) overnight.

The three-month LME copper contract rose more than 2 percent in Asian trading Monday, though growing concerns that the latest EU bailout was little more than a band-aid on a mortal wound pared gains for the day. The contract was trading at $7,352 per ton when the domestic markets closed Tuesday, down 0.8 percent for the day.

Other major contracts performed similarly Monday. Nymex West Texas Intermediate crude oil was up more than 2 percent when the domestic markets closed Monday, but ended up falling more than 5 percent overnight. The contract was trading at $81.18 per barrel as of the markets' close Tuesday, down 1.1 percent for the day.

"A rally in commodity markets early on was short-lived after markets re-appraised the $125 billion Spanish banking bailout as a stop gap solution at best," ANZ commodity analyst Natalie Robertson wrote Tuesday.

Eurozone finance ministers agreed Sunday to lend Spain the money to bail out its struggling banks, which remain at the heart of much of the uncertainty in the global financial system.

Robertson pointed out that Spanish and Italian government bond yields spiked overnight, indicating concerns about Europe have reignited.

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