Rubber Falls to One-Week Low; Weak Data Adds to Growth Concern

By Aya Takada

Nov. 6 (Bloomberg) -- Natural rubber declined for a second day as weak U.S. economic data and a sell-off in global equities increased concern that demand may fall for the commodity used to make car tires.

Futures in Tokyo fell as much as 6 percent to the lowest since Oct. 29. Asian stocks fell as companies including News Corp. and Cathay Pacific Airways Ltd. cut their profit outlook, adding to evidence the global economy is headed for a recession.

``Investors have shifted their focus back to the reality of the economy from the U.S. election,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone.

Rubber for April delivery, the most-active contract, fell 1.3 percent to 179.0 yen a kilogram ($1,822 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Prices reached a three-year low of 154.60 yen on Oct. 28.

Rubber surged as much as 7.9 percent to a four-week high yesterday as the election of Barack Obama as the 44th president of the U.S. increased investor optimism.

Still, service industries in the U.S., the world's largest economy, contracted the most on record last month, according to a report from the Institute for Supply Management. U.S. companies cut 157,000 jobs in October, the most since November 2002 and more than the anticipated drop of 102,000, according to ADP Employer Services.

Oil Slumps

Rubber futures also declined as a slump in oil prices reduced the costs of making synthetic product. Crude oil fell for a second day, extending yesterday's more than 7 percent loss, as slowing fuel demand led to an unexpected increase in U.S. gasoline inventories.

``Less consumption of gasoline means people don't use cars as much as before, and they don't need to buy tires as much as before,'' said Saito at Interes Capital.

Rubber futures tumbled 27 percent in October, a record monthly loss, as slowing car sales prompted Toyota Motor Corp. and rivals to cut output. U.S. auto sales plummeted 32 percent in October to the lowest monthly total since January 1991.

Rubber futures also dropped amid speculation the European Central Bank will cut interest rates today, sending the euro lower against the dollar and cutting the appeal of commodities as an alternative to U.S. financial assets.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 2.7 percent to 13,580 yuan ($1,989) a ton at 11:15 a.m. local time.

To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net;