Global Recap – 5th Jan, 09

Crude oil prices fluctuated around $47 a barrel as Israel's deepening incursion into Gaza and the Russian gas dispute heightened geopolitical supply fears. However, prices swung in and out of positive territory as a rally in the U.S. dollar encouraged profit-taking by investors, with oil prices up by more than 30% since the end of December. Oil prices have risen sharply from around $35 a barrel since Israel launched its Gaza offensive on Dec. 27, heightening fears for crude supplies from the Middle East. An Iranian military commander called for Islamic producers to cut supplies to Israel's supporters in Europe and the United States. OPEC's most influential member Saudi Arabia and neighbours Kuwait, the United Arab Emirates and Qatar are regional allies of the United States. However Gaza violence does not directly threaten any oil production, but there was underlying concern it could affect other countries in the Middle East, with little sign of the violence abating.

Gold dropped below $845 an ounce on the back of a dollar rally and signs of slowing physical demand. Gold weighed down heavily by a sharply higher dollar based on expectations of interest rate cuts by major central banks and news of a planned U.S. stimulus package. Reports of tumbling physical gold imports by top consumer India confirmed concerns of slowing bullion demand in emerging economies. Meanwhile gold imports by India plunged by 81% in December and down 47% in 2008, as high prices and a slowing economy dented demand.

Copper edged higher recouping earlier losses and extending a New Year's rally that saw prices climb nearly 11% in two days. Copper up in modest short-covering rebound after prices fail to break down below $1.40. Copper's morning gains buck stronger tone in the dollar, which hit a three-week high against the Euro amid expectations of interest rates cuts by major central banks and news of a planned U.S. stimulus package. Copper supported by economic data showing a less than expected decline in U.S. construction spending. China will allow tax-free imports of copper, nickel and cobalt concentrate from Feb. 1, as long as the finished products are re-exported, according to a statement on the Ministry of Commerce's website (www.mofcom.gov.cn).

U.S. construction spending tumbled by 0.6% for the month of November, according to the Commerce Department report, showing that building at the end of 2008 was stronger than Wall Street had expected. However analysts polled by Reuters had anticipated the drop to be a much steeper 1.3%. October's change was also revised to down 0.4% from the originally reported drop of 1.2%. Moreover public spending, on the other hand, increased 1.4%.


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