TOKYO: Tokyo rubber futures rose on Tuesday after a sell-off the previous day, climbing in tandem with oil and stock markets on hopes that Europe would come up with a debt plan and on an improvement in the rubber market's technical outlook.
The key Tokyo Commodity Exchange rubber contract for March delivery, which debuted on Tuesday, settled at 319.5 yen per kg, up 0.3 percent from the open of 318.7 yen.
The previous benchmark February contract settled at 318.4 yen, after plunging 12 percent to a one-year low of 303 yen on Monday.
"Technical charts had been deteriorating but they also showed the market was oversold, so a rebound was expected today," said a technical analyst at a Japanese securities firm.
The relative strength index recovered to above 30 on Tuesday, with a number below 30 suggesting the market is oversold. The index stood just above 20 on Monday.
Brent crude rose above $105 on Tuesday, the euro crawled up from eight-month lows and Tokyo stocks surged nearly 3 percent, helped by hopes that a European debt plan is in the works.
The most active Shanghai rubber contract for January delivery rose 785 yuan or 2.8 percent to close on Tuesday at 28,250 yuan ($4,413.649) per tonne.
Futures fell by their daily limit on Monday. Volume picked up to 1,208,360 lots from Monday's 1,009,508 lots.
To help limit market volatility, TOCOM, Japan's largest commodity bourse, will halve the price width of its circuit-breaker for rubber futures from October, an exchange official said on Tuesday.
"When prices fall sharply, producing countries are expected to step in to support prices so the market will eventually find a floor. But since TOCOM rubber has a high correlation with oil prices, if oil slides, it will likely drag rubber futures lower as well," the technical analyst said.
The International Rubber Consortium (IRCo) has urged Thailand, Indonesia and Malaysia to curb exports if rubber prices fall further in the wake of a global economic slowdown, a senior Thai official said on Tuesday.
Japan's auto lobby cut its forecast for this year's domestic vehicle sales by 10 percent and repeated its calls for a weaker yen and lower automobile taxes to help the industry and, by extension, the country's fragile economy.
Euro-zone officials are working to magnify the firepower of the region's rescue fund, European Central Bank policymakers said on Monday, while US President Barack Obama piled on pressure for Europe to staunch a sovereign debt crisis that threatens the world economy.
Copyright Reuters, 2011
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