Strong U.S. jobs data ignited a broad commodities rebound Wednesday, a day after prices fell their most in seven weeks.
A report showing three times more hiring than forecast for U.S. private sector jobs boosted prices of oil , metals and grains. All had fallen in early trade as the dollar strengthened and Tuesday's profit-taking retreat carried over.
Analysts said optimism that the U.S. economy was recovering more quickly than thought boosted the demand outlook for commodities, which finished 2010 as the top asset class.
"What's happening now is the global economic recovery story has become just as important as the dollar story, if not more," said Adam Sarhan at Sarhan Capital in New York. "That's the shift we're starting to see."
The Reuters-Jefferies CRBindex, a global commodities benchmark, settled up half a per cent, moving toward the 27-month high hit on Monday. The stock market also rose but at a tad less than commodities.
Gains in soybeans , sugar YO-FT, crude oil and copper led the CRB higher a day after the index fell 1.6 per cent, its biggest daily decline since mid-November. That sell-off resulted in an increase in the number of open positions, exchange data showed, suggesting limited liquidation by long funds.
The rebound came despite continued strength in the dollar, whose influence on commodities had eroded lately after investors became more focused on supply-demand fundamentals and the growth outlook for 2011. ADP Employer Services reported growth of nearly 300,000 private sector jobs in December, triple the forecast for 100,000 new jobs. Other data showed the U.S. services sector grew last month at its quickest pace since mid-2006.
Investors will watch government data due Friday for confirmation of the improving jobs picture.
The ADP data put the dollar on pace for its biggest one-day gain against the yen in more than three months and its biggest increase against the euro in more than two weeks.
The dollar has traditionally had an inverse relationship with commodities as its strength raises the cost of raw materials. Gold is often the one commodity that bucks the trend, as investors see it more as a hedge against inflation.
But even gold bounced off its lows Wednesday as the precious metal traded more in sync with the broader market than as a safe haven.
While economic data dominated the day, fundamental factors also supported various markets.
Floods in Australia hurt the wheat crop, boosting agricultural futures on the Chicago Board of Trade as a whole. CBOT's front-month wheat contract, March, finished up 2.4 per cent at above $8.08 a bushel.
Dry weather in Argentina cast doubt on that country's harvest, boosting soy and corn prices.
Crude oil's front-month on the New York Mercantile Exchange finished up 1 per cent, above the $90 per barrel mark, after the U.S. government reported that oil stockpiles fell more than forecast in the final week of 2010.
Copper's benchmark March contractalso climbed about 1 per cent to finish above $4.40 per lb on the COMEX metals division of NYMEX. On the London Metal Exchange, copper's third month recovered from an earlier low to end down $40 at $9,540 a tonne.