COMMODITIES-"Sell the fact" douses rally as central banks ease
* Copper, gold retreat on firmer dollar
* Brent crude oil gains on Norway labor troubles
* Corn, soybeans add to rally on more sizzling weather (New throughout, updates prices, market activity)
By Eric Onstad and Jonathan Leff
LONDON/NEW YORK, July 5 (Reuters) - Commodities failed to get a boost on Thursday from efforts by the central banks of the UK, Europe and China to prop up flagging growth, with copper and gold sliding as the dollar spiked against the euro.
Despite the economic fears, energy and grain markets rose on fundamentals specific to those markets. Crude oil rose due to fears that a labor lockout in Norway could hurt crude supply, while grains surged on worries that a severe drought in the U.S. Midwest could damage crops.
The 19-commodity Thomson Reuters-Jefferies CRB index eked out a small gain of 0.2 percent to 293.26, due largely to the strong gains in oil and grains. But investors did not keep up the heavy buying that had fueled the CRB's 7.7 percent advance over the past three days, one of the biggest, broad-based commodity sector rallies on record.
"You are getting a very strong 'sell the fact' move off these global rate moves this morning," said Mike Guido, managing director of hedge fund sales and energy markets at Macquarie in New York.
U.S. corn jumped 5 percent, pulling soybeans and wheat higher too as weather forecasts saw no relief from the worst Midwest drought in a quarter-century. Benchmark Brent crude rose above $100 a barrel, posting its highest settlement since the end of May on fears about supply from Norway.
Commodities had slumped in the second quarter as fears deepened about Euro zone debt and shaky economic conditions. The three-day rally to start the third quarter came on the view that commodities would rebound more quickly than other assets as central banks rolled out new stimulus measures.
Commodities got an early boost on Thursday from on a surprise rate cut from China, its second in two months, but prices ebbed after the European Central Bank trimmed its main refinancing rate by a quarter point but declined to resume a bond-buying program.
The euro slumped to a one-month low against the dollar, and the U.S. unit strengthened against a basket of currencies, increasing the cost of commodities priced in dollars to investors in other currencies.
Attention now shifts to Friday's U.S. jobs report, expected to show nonfarm payrolls increased by 90,000 in June after May's 69,000 gain. Data on Thursday showing U.S private employers stepped up hiring and jobless claims fell by the most in two months offered some hope for a brighter outlook.
China's second rate cut in two months sliced its benchmark lending rate 31 basis points to 6 percent, prompting some to worry that upcoming economic data would be worse than expected.
"The market is not sure what to do with the news. It is positive news that China is easing its monetary policy but there are worries that the slowdown might be worse than originally anticipated," James Zhang, an analyst at Standard Bank, said.
Copper, the commodity most exposed to Chinese growth, fell 0.5 percent to $7,695 a tonne on the London Metal Exchange after earlier rising as much as 0.8 percent after the Chinese rate cut. Spot gold lost 0.7 percent to $1,603.50 an ounce, wekeaned by the rising dollar.
GRAINS EXTEND RALLY
Despite the macro-economic worries, U.S. corn extended one of its biggest rallies ever, while soybeans jumped to within 20 cents a record high as new forecasts offered no sign of rain to relieve crops parched by the worst drought in 24 years.
Corn prices have surged by nearly 30 percent over the past two weeks, pulling wheat and soybean prices up with them and raising the specter of food inflation.
Weather forecasters said a spell of blistering triple-digit heat should ease by the weekend, but predicted that key growing states would remain thirsty for rain. Grains prices rose more after a midday update showed the hot weather could return in the middle of next week.
Chicago Board of Trade December corn gained 34 U.S. cents, or 5 percent, to $7.08-1/2 a bushel by 1:05 p.m. CDT (1804 GMT). The most active Chicago November soybean contract spiked 43-3/4 cents, or 3 percent, to $15.18-1/2 per bushel, touching a contract high of $15.21 a bushel.
NORWAY FEARS HIT BRENT
Oil prices rose above $100 a barrel after oil companies in Norway called a lockout of some 6,500 offshore oil and gas workers from July 9 in a bid to force the government to step in and end a strike. Statoil said the shortfall would amount to 1.2 million barrels per day of oil equivalent.
Norway's labor ministry declined to say whether it would intervene but said a lockout was legal.
Brent crude surged by 2.6 percent to a high of $102.34 a barrel, before giving up some of the gains to settle at $100.70 a barrel, up 93 cents. Trading volume was more than double the one-year average at over 865,000 lots.
U.S. crude oil inventories fell 4.3 million barrels last week, far more than the forecast, but traders said the figure was likely inflated by delivery delays caused by Tropical Storm Debby. Imports slumped for a second week. Prices at 4:14 p.m. EST (2014 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG US crude 86.88 -0.78 -0.9% -12.1% Brent crude 100.33 0.56 0.6% -6.6% Natural gas 2.945 0.046 1.6% -1.5% US gold 1609.40 -12.40 -0.8% 2.7% Gold 1603.24 -11.89 -0.7% 2.5% US Copper 349.15 -4.65 -1.3% 1.6%
Dollar 82.808 1.028 1.3% 3.3% CRB 293.260 0.620 0.2% -3.9% US corn 708.50 34.00 5.0% 9.6% US soybeans 1551.50 53.50 3.6% 29.5% US wheat 822.50 40.25 5.2% 26.0% US Coffee 180.35 -0.10 -0.1% -21.0% US Cocoa 2328.00 -22.00 -0.9% 10.4% US Sugar 22.33 0.11 0.5% -3.9% US silver 27.672 -0.608 -2.1% -0.9% US platinum 1476.70 -13.70 -0.9% 5.1% US palladium 585.75 -13.15 -2.2% -10.7% (Additional reporting by Susan Thomas, Julia Payne, Rod Nickel, Gene Ramos and Mark Weinraub; editing by Jane Baird and David Gregorio)
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