TOCOM rubber falls to 10-month low on weak China data

Benchmark Tokyo rubber futures fell to a fresh 10-month low on Friday, marking the biggest weekly drop in 5-1/2 months, as China’s weak manufacturing data raised worries over demand in the world’s top buyer and slumping oil and stock prices weighed on market sentiment.

Activity in China’s factory sector shrank at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled, a private survey showed, adding to worries that the world’s second-largest economy may be slowing sharply.

The Tokyo Commodity Exchange (TOCOM) rubber contract for January delivery finished 1.0 yen, or 0.5 percent, lower at 183.6 yen ($1.49) per kg, after touching a low of 181.8 yen, the lowest since Oct 17, 2014.

For the week, the TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, lost 5.3 %, booking the biggest weekly drop since early March.

“Lower prices of oil and equity markets as well as the yen’s rise against the U.S. dollar all added to pressure,” said Hiroyuki Kikukawa, general manager at Nihon Unicom Inc.

U.S. oil prices headed for their eighth consecutive week of falls on Friday, the longest losing streak since 1986, after a sharp drop in Chinese manufacturing increased worries over the health of the world’s biggest energy consumer.

World stock markets tumbled towards their worst week of the year on Friday as more alarming data from China sent investors scurrying to the safety of bonds and gold.

Shanghai stocks dropped 4 % to below the 200-day moving average for the first time since July 2014 while Japan’s Nikkei declined 2.9 percent.

“We may see some technical rebound next week, but the TOCOM market will stay on the downtrend due to persistent concerns about Chinese economy,” Kikukawa said.

The most-active rubber contract on the Shanghai futures exchange for January delivery rose 35 yuan to finish at 12,035 yuan ($1,883.79) per tonne.

The front-month rubber contract on Singapore’s SICOM exchange for September delivery last traded at 131.3 U.S. cents per kg, up 1.5 cent.