Filomena Scalise

Commodities rose on Thursday, led by crude oil and metals, after a deal by European leaders to tackle the euro zone debt crisis enticed investors back into riskier assets.

Brent crude rose for the first time in three days, and copper on the London Metal Exchange gained almost 5 percent, hitting its highest level in more than a month.

“We've seen an upturn in risk appetite across the board; the equity markets have moved higher, the dollar's weakened and that's tended to take a lot of commodities higher,” Standard Chartered analyst Daniel Smith said.

Euro zone leaders struck a deal with private banks and insurers for them to accept a loss on their Greek government bonds under a plan to lower Greece's debt burden and try to contain the two-year-old euro zone crisis.

The agreement was reached after more than eight hours of hard-nosed negotiations involving bankers, heads of state, central bankers and the International Monetary Fund. It aims to draw a line under spiraling debt problems that have threatened to unravel the European single currency project.

Investor risk appetite weighed on the gold price, which usually tends to benefit from uncertainty, although evidence of demand for physical metal helped contain the slide. Spot gold was up 0.4 percent at $1,726.89 an ounce at 14:16 SA time.

“This morning is all about risk-on,” said RBS commodities strategist Nikos Kavalis. “Today the (gold) price has come under some pressure but has been supported by good buying from private banks.”

SIGNS OF GROWTH

Investor confidence was also bolstered by data from the United States showing signs of economic growth.

US durable goods data on Wednesday indicated the economy was heading into the fourth quarter with solid momentum, showing that demand for a range of long-lasting US-made goods rose at the fastest pace in six months in September.

And in big commodity consumer China, there are expectations the government may loosen a tight liquidity policy in the fourth quarter as growth slows, while hopes are running high that inflation has peaked.

Global stock prices and the euro rose on news of the deal, and the dollar fell against a basket of currencies . A weaker dollar makes commodities priced in the unit cheaper for holders of other currencies.

Brent crude was up $2.22 at $111.13 a barrel, and US crude gained $2.62 to $92.82 a barrel.

“The macro event and the financial markets are leading and oil futures are reacting, even though the crude inventories in the US have increased substantially,” said Victor Shum of Purvin & Gertz.

Three-month copper on the LME rose 4.6 percent to $8,035 a tonne, after rising 2 percent and touching a one-month high in the previous session.

The metal is also being supported by labour disputes that led Freeport MacMoRan Copper & Gold to declare force majeure at its Grasberg mine on Wednesday.

Copper had lost a quarter of its value in the three months through September, making it one of the worst performers among commodities during that period. The industrial metal has rebounded as strikes have disrupted output, with prices already up 11 percent so far this quarter.

“Encouraging headlines on an agreement on measures to find a solution to the euro zone sovereign debt crisis seems to be the main driver,” said Citigroup analyst David Thurtell.

Grains also rose, with US wheat up 1.7 percent on Thursday. Corn firmed following its biggest drop in a month. - Reuters