(Updates prices; changes byline and dateline, pvs
* Rally after EU acts to lower Italy, Spain borrowing costs
* Investors, analysts still wary of EU's structural problems
* CRB notches biggest one-day gain since September
* Oil up most since Feb 2011, copper spikes most in 7 months
* Many markets still down for the quarter
By Barani Krishnan
NEW YORK, June 29 Commodity markets posted their
biggest rally for the year on Friday as a debt deal in Europe
spurred investors to scoop up beaten-down oil and metals futures
at the end of the worst quarter for raw materials since
European leaders agreed on a deal to cut soaring borrowing
costs in Spain and Italy, boosting sentiment on the last trading
day of June.
Oil futures jumped as much as 6 percent for the day,
the biggest gain in a session since February 2011. Copper
had its biggest one-day rally in seven months, and gold
its largest run-up since the start of June.
Corn, soybean and wheat prices powered to
new highs too, extending this month's unexpected rally on fears
that hot, dry weather was decimating crops in the U.S. Midwest.
The across-the-board surge lifted the Thomson
Reuters-Jefferies CRB index by about 3 percent, putting
it on course to its best performance for the day since September
The last minute rally saved the quarter ending as the worst
since the onset of the financial crisis in 2008. Instead, the
CRB showed a 9 percent drop for its poorest showing since the
third quarter of 2011.
Oil was the worst hit in the quarter with a loss of more
than 20 percent.
Some investors and analysts remained cautious about the
third quarter, saying the EU deal fell short of fixing
structural problems in the euro zone crisis that still left
markets vulnerable to violent shocks if the region's debt
situation took another nasty turn.
"Only when you have structural fixes can you think about a
third quarter that will look a lot more positive," said Pau
Morilla-Giner, who runs London & Capital's $280 million Global
"At the moment, it's still very uncertain. I actually see no
reason to be very excited about it."
Responding to pleas from Spanish and Italian leaders, who
had threatened to block a package of growth measures, the euro
zone agreed that its rescue funds could be used to stabilize
bond markets without forcing countries that comply with EU
budget rules to adopt extra austerity measures or economic
But many details had yet to be worked out and leaders
appeared at odds over just how strict the conditions attached to
any assistance should be.
The euro headed for its best day against the dollar in eight
months after the deal, making dollar-denominated commodities
such as oil even more attractive to euro holders.
U.S. crude oil jumped nearly $5 to a session high
above $82 per barrel, after losing more than $8 from the
beginning of June through Thursday.
London's Brent crude oil rose more than $4 to an
intraday peak above $95 per barrel. It had slid more than $10
earlier in the month.
"I think the expectation was it would take the EU most of
the weekend to reach an agreement, so I think this has taken the
market a bit by surprise," Thorbjoern Bak Jensen, oil analyst at
Global Risk Management, said, describing the outsized move.
Copper's benchmark three-month month contract in London
jumped nearly 4 percent, or more than $300, to a
one-month high above $7,690 a tonne.
Aside from the euro zone deal, copper also got a boost from
a policy decision by China, the world's top consumer of the
metal, that favored commodity investors. China's central bank
said it would use a basket of policy tools to keep credit and
money supply growth at a steady and reasonable pace.
While copper rose for the day, it was still down nearly 11
percent on the quarter, on course for its worst performance
since the third quarter of 2011. For the year, the metal showed
a 20 percent loss.
Gianclaudio Torlizzi of T-Commodity were among analysts who
were unconvinced that copper had not seen its bottom, saying the
potential for an improved economic picture from the EU deal "has
given funds a pretext to pile up on metals".
Gold rose 3 percent, with the spot price of bullion scaling
a one-month high of $1,600 an ounce.
For the quarter, though, bullion was on track to a loss of
more than 4 percent, its biggest quarterly drop since the three
months to September 2008.
(Additional reporting by Eric Onstad in London and Manolo
Serapio Jr in Singapore; Editing by Marguerita Choy)