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GLOBAL MARKETS-Commodities hit as dollar rises

Published 2015-11-23, 08:18 a/m
GLOBAL MARKETS-Commodities hit as dollar rises
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JP225
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HG
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ESZ24
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CL
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* Oil, base metal prices fall again as dollar gains
* Euro under pressure as ECB seen easing next week
* Bond spreads widen sharply to underpin US dollar
* Pfizer set to buy Allergan (N:AGN_pa) for over $150 bln-sources

By Marc Jones
LONDON, Nov 23 (Reuters) - Commodity markets were hit and
stocks and bonds were in the firing line on Monday, as
expectations for a first increase in U.S. interest rates in
almost a decade next month pushed the dollar to a seven-month
high.
Industrial metals copper and nickel plunged and oil prices
whipsawed, while the euro fell as low as $1.06 as the prospect
of more policy easing by the ECB in Europe was compounded by a
security lockdown in Brussels.
European stocks .FTEU3 were down 0.5 percent despite
better-than-expected euro zone data as the slump
in commodities and the unrelenting appreciation of the dollar
dominated sentiment at the start of the week.
Copper CMCU3 slumped to a fresh six-and-a-half year low
and nickel CMNI3 dived more than 4 percent to its lowest since
2003 as traders bet metals prices still had further to fall,
given slowing factory demand in China. MET/L
Oil prices were highly volatile, with U.S. crude CLc1 off
$1.30 or 3 percent at $40.60 a barrel at one point and Brent
LCOc1 down 2 percent at $43.57 before both jumped on comments
from Saudi Arabia on co-operation with other producers. O/R
That put commodity-linked currencies such as the Russian
rouble on another ride RUB= and even safe-haven gold XAU=
was not immune as it hovered around $1,070.56 an ounce, having
touched its lowest level in nearly six years.
"The biggest factor here is the dollar," said Hans van Cleef
a senior energy economist at ABN Amro in Amsterdam. "It is
having an impact on all major commodities at the moment."
"More and more investors are watching it (commodities
sell-off) and sentiment therefore gets more jittery."
Wall Street was expected to see a subdued start to
Thanksgiving week ESc1 with November manufacturing and home
sales figures set to feed the Fed rate hike debate. ECONG7
The dollar's .DXY fresh push left the euro EUR= at a
seven-month low overnight, though the common currency managed to
fend off the market's first attempt at dragging it below $1.06.
/FRX
It was given some help as purchasing manager data showed
euro zone business activity picking up at its fastest pace since
mid-2011, partly thanks to the currency's recent weakness.
ID:nL8N13I1DJ
That also helped Europe's main bourses claw back some of
their early losses, although the early woes around commodities
ensured miners and oil and gas firms .SXPP .SXEP remained
the worst performers. .EU
The healthcare sector was also in focus after Pfizer PFE.N
secured formal board approval on Sunday for its more than $150
billion acquisition of Botox maker Allergan AGN.N , that will
create the world's biggest drugmaker. ID:nL1N13H0K5

EUROPE
ECB stimulus hopes helped underpin Europe. The head of the
European Central Bank, Mario Draghi, last week offered the
strongest hint yet that the ECB will unveil fresh easing
measures at its Dec. 3 policy meeting.
Its stance is in stark contrast with that of the U.S.
Federal Reserve, which seems set to lift rates in December for
the first time in a decade.
As a result the premium offered by U.S. 2-year paper over
the German equivalent yawned to 130 basis points, the widest
since 2006. Overall, though, euro zone yields edged higher ahead
of the Fed and a heavy week of sovereign debt sales. GVD/EUR

Against a basket of currencies .DXY the dollar firmed 0.3
percent to 99.881, whilst also rising to 123.19 yen JPY= .
Emerging market were being squeezed again although
Argentinean assets got a boost from the election victory of
pro-business opposition candidate Mauricio Macri who has
promised to open up the ailing economy to investors.
ID:nL8N13F4ER
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS ended off 0.2 percent. South Korea's main index
.KS11 gained 0.7 percent while Australian stocks .AXJO added
0.4 percent. Japan's Nikkei was closed for a holiday.
"Interestingly, (equity) markets are treating the prospects
of policy divergence reasonably well," said Jo Masters, a senior
economist at Australia and New Zealand Bank.
"But with two of the world's major central banks about to
head on divergent policy paths, can such smooth sailing continue
over the months ahead?" they wondered. "Increased policy tension
is likely to mean that volatility remains elevated."

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