By Elizabeth Campbell and Chanyaporn Chanjaroen – Sep 27, 2011
Commodities rose the most in four months, led by metals and energy, on signs that European policy makers will intensify efforts to contain the region’s debt crisis.
The Standard & Poor’s GSCI index of 24 raw materials rose 3.3 percent to 620.02 at 3:45 p.m. New York time, the biggest gain since May 9. Last week, the gauge plunged 8.2 percent.
Greek Prime Minister George Papandreou won parliamentary backing for a property tax to meet deficit-reduction targets required to avoid default. U.S. Treasury Secretary Timothy F. Geithner had predicted that European governments will step up their response to the crisis.
“Some people put some risk trade back on after last week,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “People are hoping for a solution to the euro zone debt crisis.”
All of the GSCI components posted gains. In London, lead prices jumped the most since August 2009, and nickel rose more than 5 percent. In New York, crude oil posted the biggest increase in four months, and silver climbed the most since July.
The MSCI World (MXWO) Index of equities advanced for the third straight session, and the dollar declined for the second day in a row against a basket of six major currencies, enhancing the investment allure of commodities.
“Hopes of a bailout solution for European banks are prompting a change in sentiment across financial markets, helping energy and base metals to rebound from steep losses,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “But the situation is still fragile, given persisting economic concerns, so a renewed price fall cannot be ruled out.”
The GSCI index has dropped 1.9 percent this year. In April, the measure reached a 32-month high.
“The selloff is probably not over,” Tobias Merath, the head of global commodity research at Credit Suisse AG in Zurich, said in a report. “Indicators of funding stress are still showing growing and not easing pressures.”