Rubber Advances on Speculation Bailout Plan Will Revive Demand

By Rattaphol Onsanit

Oct. 1 (Bloomberg) -- Natural rubber futures in Tokyo rebounded from their lowest this year on speculation that demand may gain should U.S. lawmakers revive a $700 billion financial- rescue plan, helping to bolster the global economy.

The commodity, used to make car tires, snapped five days of losses to climb as much as 2.8 percent after the largest drop in U.S. shares in more than two decades on Sept. 29 prompted U.S. lawmakers to reconsider their earlier opposition to the package.

There's ``better sentiment on the U.S. bailout plan,'' said said Rewat Yenchai, an analyst at Bangkok-based AGRO Enterprise Ltd. Some funds were buying rubber, Rewat added.

Rubber for March delivery gained as much as 6.9 yen to 257.8 yen a kilogram ($2,350 a metric ton) on the Tokyo Commodity Exchange, and traded at 256 yen at the 11 a.m. break. The most- active contract lost 27 percent in the three months ended yesterday, its worst quarter in two years.

The Sept. 29 slump wiped $1.2 trillion from the market value of American equities and sent lawmakers scrambling to revive the rescue plan to try and prevent a meltdown in financial markets. U.S. equities gained yesterday, and Senate Democrats and Republicans may vote on the bailout later today, paving the way for vote in the House later this week.

Rubber futures also gained as crude oil rose, boosting costs of producing rival synthetic rubber, which is distilled from petroleum. The U.S. is the world's biggest automobile market.

``With the optimism in the stock market, that spilled over to the crude market,'' said Mark Hansen, director of trading at CPM Group in New York in an interview with Bloomberg Television.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net