MUMBAI: Fears of euro region economies on collision course spread tremors across the global financial markets. Commodity counters were worst hit with base metal complex continuing to crash lower while crude oil prices extended their decline to a 3 month low. German Chancellor Angela Merkel's statement on $1 trillion rescue package which is aimed at buying out time for the euro region had a little positive impact on the market sentiment. In fact, the possibility of split of the euro zone, pushed the currency to a more than 18-month low against the dollar.
Direct result of the continuing slide in euro against various currencies is imminent on commodity prices. US crude oil futures declined for five days in a row. Apart from prevailing concerns about the European economy, swollen oil inventories and stronger dollar sent crude oil prices below $70 a barrel mark for the first time since February 5, 2010.
Nymex crude oil for June delivery was down $1.45 at $70.15 a barrel, after settling down $2.79 at $71.61 on Friday, stretching a two-week tumble to $14.54, or 16.9%, the biggest two-week percentage loss since the period ending January 16, 2009. The contract, which fell to $70.83 on Friday, the lowest since February 8, is expected to face volatility ahead of Monday's June crude options expiration and the May 20 June crude contract expiration.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract's West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record 37 million barrels, pushing front month US crude down relative to both more distant futures contracts and the alternative global crude benchmark, Brent.
Meanwhile, BP said it had limited success at containing the oil that is gushing unabated into the Gulf of Mexico on Sunday and said it may be able to stop the flow permanently in about a week.
Crude oil’s loss translated into a gain for Gold. The yellow metal ticked up this morning but held below a record struck last week, while holdings on the world's largest gold backed ETF rose to another record on concerns a $1 trillion European rescue package would fail.
Spot gold was at $1,238.10 an ounce, up $7.20 from New York's notional close on Friday, when it hit a record of $1,248.95 an ounce before falling back as investors sold bullion to cover losses in equities, oil and other commodities. Gold priced in euro and sterling held near all time highs.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at a record high of 1,214.07 tonnes by May 14, up from 1,209.50 tonnes the previous business day.
London copper futures extended losses this morning, touching more than one-week lows, as the dollar continued to win over the euro on fears spending cuts in the euro zone would derail a fragile recovery in the area.
Three-month copper on the London Metal Exchange (LME) was down $155 at $6,730 a tonne, after hitting an early low of $6,873, its weakest since May 7.
Aluminium and zinc prices have also witnessed sharp sell-off. Zinc for 3-month delivery was last down nearly 5% to $1,955 a tonne while Aluminium in Shanghai slide almost 5% to near downside limit of 14,890 yuan.
Domestic commodity futures depict similar trend in today’s session so far. MCX crude oil futures for May settlement lost 1.6% to trade at Rs 3,211 per barrel after having spent the day between Rs 3,258 and Rs 3,201.
Precious metal counters gained following the previous day’s increased activity on the physical markets. Gold buying witnessed a sharp rise on account of ‘Akshaya Tritiya’. Apparently, MCX Gold for June settlement contract reached a fresh life high of Rs 18,424 before retracing to current level of Rs 18,367 per 10 grams. MCX Silver July settlement contract traded 0.5% higher at Rs 29,818 per kg, after having opened the session at Rs 29,750. The contract came close to touch Rs 30,000 mark in early trade.
Base metal counters witnessed another round of sharp sell-off tracking the overseas markets. MCX copper for June settlement was last trading 1.6% lower at Rs 307.75 per kg. MCX zinc May contract lost 2.5% to trade at Rs 88.90 per kg.
