Crude oil prices rose and base metals advanced on Friday as risk appetite strengthened after members of the eurozone finally agreed a rescue package for Greece.
David Mackie, European economist at JPMorgan said the agreement on a support mechanism for Greece appeared to give “something to everyone” as Germany had secured co-funding with the IMF, France had obtained a commitment to “a strong co-ordination of economic policies in Europe” and Greece had a sufficiently detailed mechanism to bring down government bond yields ahead of its refinancing programme.
“It is important to stress that what has been agreed is a support mechanism, not a package of loans to be made to Greece now,” said Mr Mackie: “Whether or not this mechanism is ever activated remains to be seen. It will depend on how Greece fares in the capital markets in the coming months. It is certainly possible that no money ever changes hands.”
In energy markets, Nymex May West Texas Intermediate rose 60 cents to $81.13 a barrel, while ICE May Brent added 69 cents at $80.30 a barrel.
US natural gas prices stabilised after dropping to a six-month low in the previous session amid concerns about growing supply and weak demand as seasonal temperatures rise.
Nymex April Henry Hub was fractionally higher at $3.983 per million British thermal units after US inventories data, released on Thursday, showed gas stocks rose for the first time this year with an increase of 11bn cubic feet, slightly above the consensus market forecast. US gas stocks usually do not start to rise until slightly later in the year but mild weather in March has dented demand.
Gold failed to regain the $1,100 an ounce level, trading as high as $1,098.75 after ending Thursday’s session in New York at $1,090.80 a troy ounce.
Thomas Stolper at Goldman Sachs said the involvement of the IMF in solving the crisis in Greece had exposed the weaknesses in the fiscal framework of the eurozone.
“It appears now increasingly likely that the eurozone countries will embark on a multi-year process of rebuilding the framework for fiscal co-ordination within the eurozone, possibly aiming at a new treaty,” said Mr Stolper.
James Steel, precious metals analyst at HSBC, said that if a resolution to the crisis in Greece were eventually to lead to closer political integration, gold could be a beneficiary, especially if this led to the euro strengthening against the dollar.
Base metals advanced after strong gains for equities in Shanghai prompted a flurry of speculative buying in morning trading in London.
Copper rose 1.4 per cent to $7,496 a tonne, while aluminium added 1.1 per cent at $2,233 a tonne, zinc gained 1.5 per cent at $2,260 and lead was 0.6 per cent firmer at 42,097 a tonne.
Nickel outperformed the rest of the base metals sector, up 3.4 per cent to $23,420 a tonne, in anticipation of a stronger recovery in global steel demand this year.
On Thursday, Brook Hunt, the consultancy, predicted that the nickel market would have a supply deficit of at least 10,000 tonnes this year but that a supply surplus would return in the following three years. Brook Hunt forecast nickel prices to average $18,739 a tonne ($8.50 per pound) this year.
Sugar prices finally showed signs of stabilising after recent heavy selling. ICE May raw sugar added 0.8 per cent to 17.19 cents a pound while Liffe May white sugar added 0.5 per cent to $484.8 a tonne.
