Commodity ETFs Turn Mixed As Global Economic Outlook Shifts (BNO, JJC)

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August 5, 2011 11:18am NYSE:BNO NYSE:JJC

Tim Seymour:  An unexpectedly strong U.S. job market gave traders hope for the health of the global economy and delivered a relief boost for some commodity markets. However, some key markets continued to decline.


The broad U.S. unemployment rate receded to 9.1% in July thanks to a surprise uptick of 117,000 new positions added to American payrolls.

While not a spectacular improvement, the numbers salved traders’ worst fears about a new recession on the horizon for the world’s biggest consumer economy — the engine of a full 25% of global GDP.

That, in turn, led some to dip back into commodity markets battered in Thursday’s broad-based rout.

Oil prices edged up 1.7%, partially recovering from the previous day’s 5.8% loss and giving associated ETFs like the United States Brent Oil ETF (NYSE:BNO) a comparable lift:

However, part of the upside for oil was based on fleeting concerns that a pipeline explosion in Iran would disrupt suppl. There is little chance industrial activity will accelerate soon and require substantially more fuel any time soon.

Other key industrial materials — notably copper, down another 0.70% in morning trading — drifted lower.

The iPath DJ-UBS Copper TR Sub-Idx ETN (NYSE:JJC) is now down 3% from where it closed Wednesday night:

For these assets, traders say only a significant improvement in confidence around Chinese demand for commodities will help boost prices in the near term.

Also somewhat ominously for the growth bulls, gold went back on the offensive, up 0.3% to once again approach record levels.

Traders attributed Thursday’s uncharacteristic losses in the gold market — which normally prospers when volatility and fear are on the rise — to a series of forced sales due to margin calls on other assets.

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.


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