Oil and gold recover after China's rate rise

China's surprise decision to raise interest rates spooked the commodities markets yesterday, but prices are increasing again today

 

Gold edged up this morning to

 $1,341.45 an ounce, but was still well below the all-time high of $1,387.10 hit last Thursday. Photograph: Yuriko Nakao/Reuters

Oil and gold prices bounced back today, recovering from yesterday's falls that were triggered by China's surprise decision to raise interest rates.

Oil prices rose above $80 a barrel. Benchmark oil for November delivery was up 84 cents to $80.32 a barrel in electronic trading on the New York Mercantile Exchange. Yesterday the contract tumbled more than 4% to below $80 for the first time this month after China spooked investors by raising rates for the first time in almost three years. In London, Brent crude rose 71 cents to $81.81 a barrel on the ICE Futures exchange.

"It seems to me there was a very knee-jerk reaction to the China move across all commodities, and now people are starting to step back and think about what it actually means for Chinese growth," said Yingxi Yu, commodities analyst at Barclays Capital in Singapore. "The answer is probably not much. The actual impact of this rate hike might be limited on the overall growth story in China."

Gold also edged higher this morning, recovering from yesterday's 2.5% drop, as markets reassessed the rate hike. Spot gold climbed to $1,341.45 an ounce after hitting a two-week low of $1,334.45 yesterday, far below the all-time high of $1,387.10 hit last Thursday.

Yesterday's rally in the dollar proved short-lived. It slipped 0.2% against a basket of major currencies today following yesterday's gain of more than 1.6%.

China's key stock index closed 0.07% higher after a volatile session. The Shanghai Composite Index finished the day at 3,003.95 points, after falling nearly 2% earlier on. By contrast, most other Asian markets closed lower although they pared earlier losses. Japan's Nikkei index fell 1.7%, to 9,381.60, its lowest close in two weeks. Australia's benchmark index was off 0.7% at 4,623.5 while the Hang Seng in Hong Kong slid 0.9% to 23,543.59.

Analysts said traders were using the interest rate hike as an excuse for profit-taking