TOCOM marks 1-wk top on Shanghai surge, strong oil

Benchmark Tokyo rubber futures jumped more than 2% to hit one-week highs on Wednesday, recovering above the key 200-yen level, supported by a surge in Shanghai futures overnight and on higher oil prices.

"Shanghai's sharp gain overnight led the way," said Jiong Gu, an analyst at Yutaka Shoji Co, adding that healthy automobile sales in China, the world's biggest rubber consumer, was a supporting factor.

China's vehicle sales rebounded in June, the country's top industry association said, shaking off weakness seen in the previous two months as carmakers grappled with a rollback in tax incentives that drove strong growth last year.

"Car inventories at auto dealers in China are declining while a growth pace of rubber inventories in Shanghai and Qingdao combined is slowing, which gives a positive signal," he said.

Oil prices rose more than 1% on Wednesday, extending gains from the previous day as the US government cut its crude production outlook for next year and as fuel inventories plunged.

The Tokyo Commodity Exchange (TOCOM) rubber contract for December delivery finished 4.5 yen, or 2.3%, higher at 201.8 yen (US$1.78) per kg. It hit the highest since July 4 of 203.8 yen earlier in the session.

The most-active rubber contract on the Shanghai futures exchange for September delivery surged 420 yuan to finish at 13,235 yuan (US$1,950) per tonne, after touching a one-week high of 13,420 yuan.

"I expect Shanghai futures to be traded between 13,000 and 13,500 yuan and the TOCOM to hover between 200 and 250 yen for a while, with investors also eyeing the yen's move," Gu of Yutaka Shoji Co said.

The US dollar, which touched a four-month high of 114.495 yen on Tuesday spurred by the recent rise in US government bond yields, reversed course to fall 0.2% to 113.675 yen on Wednesday.

Investors were wary ahead of US Federal Reserve Chair Janet Yellen's semi-annual monetary policy testimony before Congress later on Wednesday and on Thursday.

The front-month rubber contract on Singapore's SICOM exchange for August delivery last traded at 149.9 US cents per kg, up 2.8 US cent.

(US$1 = 113.4000 yen)

(US$1 = 6.7866 Chinese yuan)