Commodities jumped the most in three weeks after European leaders agreed to ease repayment rules for emergency loans to Spanish banks and relax conditions on possible help for Italy, increasing optimism that the region’s debt crisis may be contained.
The Standard & Poor’s GSCI Spot Index of 24 raw materials soared as much as 1.8 percent to 577.49 points, the biggest gain since June 6, before trading at 576.33 at 2:47 p.m. in Singapore. Crude oil jumped as much as 2.9 percent in New York and copper rose 2.1 percent. The increase in the gauge trimmed its quarterly loss to 16 percent, still the worst since the final three months of 2008.
After 12 hours of talks ending at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks, European Union President Herman Van Rompuy said. Banks can also be recapitalized directly with funds rather than going through governments, he said.
“The fundamental problem in Europe is still out there, but the decision that came out today gave some comfort and confidence to the markets.” Alexandra Knight, an analyst at National Australia Bank Ltd., said by phone from Melbourne.
European leaders also discussed ways to reduce the risk premiums on Italian and Spanish bonds, which have driven concern by economists, investors and Europe’s global partners including the U.S. that the currency union risks coming apart.
The commodities gauge plunged 44 percent in the final quarter of 2008 when the bursting ofthe U.S. real-estate bubble and collapse of Lehman Brothers Holdings Inc. pitched the world into a recession. Raw materials entered a bear-market last week as Europe’s crisis escalated and concern mounted that the U.S. recovery was faltering.
Losses in the quarter have been led by cotton, crude oil and gasoline, with the decline in the S&P GSCI exceeding the 8.4 percent fall in the MSCI All-Country world Index of equities. Raw materials have also been hurt by signs of slower growth in China, the world’s largest user of base metals.
“We expect increasing risks in the global economy in the second half,” said Lynette Tan, an analyst at Singapore-based Phillip Futures Pte Ltd. “The U.S. and China are still not doing well and the debt problems in Europe look set to worsen.”
West Texas Intermediate crude futures rose as high as $79.95 a barrel before trading 2.6 percent higher at $79.70 on the New York Mercantile Exchange. Three-month copper gained to $7,538.50 a ton before trading at $7,530.