Commodities gain on good US data

Commodities bounced back in the U.S. upon release of better than expected December employment figures and good performance in the service industries, reflecting better economic prospects and growth in the demand for industrial, crops and energy.

The ADP Employer Service showed that the 297,000 December payroll, the highest since the US payroll services provider started its compilation a decade ago, far exceeded the 100,000 employment number expected by analysts.

Of 24 raw materials, sugar and wheat mostly accounted for the 1 percent increase provided in the Standard & Poor’s GSCI Total Return Index. The figure earlier went down to 1.3 percent after yesterday’s slide of 1.7 percent.

T&K Futures & Options President Michael K. Smith observed that the sell-off was “overdone.” He said,” There are enough fundamental reasons for several commodities to rise. The U.S. reports were fantastic and that shows the economy is growing. Also, demand for commodities in emerging countries is insatiable.”

The Institute for Supply Management’s non-factory index records since May 2006 revealed that the service industries gave their best performance in the month of December 2010.

James Dailey, TEAM Financial Asset Management LLC manager, commented, “We are still in the dip-buying phase.” He foresees “a violent bull-market correction” in four to six months prior to price increase.

Raw sugar-futures rose to 3.9 percent in New York in anticipation of the decline in supplies coming from Brazil, the world’s number one exporter, and from Australia, the number three biggest exporter.

The perceived decrease in soybeans and corn outputs caused by dry weather in the major producers, Argentina and Brazil, are lifting prices in the market this week.

Crude oil rose to 1 percent while copper demonstrated its fourth increase in five sessions.