Rubber Rises to Two-Week High as Oil, Equity Gain Lifts Demand

By Jae Hur

Aug. 28 (Bloomberg) -- Rubber advanced to a two-week high, heading for a second monthly gain, as rallies in crude oil and stocks boosted optimism for an economic recovery, increasing demand for the commodity used to make tires.

Natural rubber in Tokyo added as much as 2.7 percent after oil rose 1.5 percent yesterday as equity gains lifted investor sentiment and the dollar weakened, boosting the appeal of commodities as a hedge against inflation. Oil has risen 4.9 percent this month, boosting the cost of synthetic products.

“Oil’s rally and rising equities have bolstered investor sentiment,” Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said today by phone. “Futures may test the recent high of 214 yen.”

February-delivery rubber, which was listed on Aug. 26, rose as much as 5.6 yen to 212.4 yen a kilogram ($2,265 a metric ton), the highest intraday level since Aug. 14, on the Tokyo Commodity Exchange and was at 211.5 yen at 10:22 a.m. The most-active contract has gained 8.2 percent this month after jumping 20 percent in July.

Crude oil for October delivery gained 0.4 percent to $72.80 a barrel on the New York Mercantile Exchange after rising $1.06 to $72.49 yesterday.

The MSCI Asia Pacific Index rose 0.7 percent to 113.79 as of 10:28 a.m. in Tokyo. The gauge has jumped 62 percent from a more than five-year low on March 9 on speculation government stimulus packages and lower borrowing costs will revive the global economy.

In the U.S., the Standard & Poor’s 500 Index added 0.3 percent yesterday and the Dow Jones Industrial Average advanced 0.4 percent, rallying for the eighth straight day.

A report showing that the U.S. economy contracted less than anticipated in the second quarter amid a jump in government spending and smaller cutbacks by consumers also supported oil prices. The total number of people collecting unemployment insurance fell to the lowest level since April, in a sign that the economy is pulling out of the recession.

January-delivery rubber on the Shanghai Futures Exchange added 2.1 percent to 19,080 yuan ($2,793) a ton at 9:35 a.m. local time.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net