NY cotton gains most in 14 mos, commodities rally

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* Cotton posts biggest one-day percentage increase since April 2011

* U.S. equities jump on signs of a deal to rescue Spanish banks

* Short cover buyers rush in on the first sign cotton has rebounded

June 6 (Reuters) – U.S. cotton futures surged on Wednesday for their biggest daily percentage gain since April 2011, rallying initially with other commodities and U.S. stock markets, then pushing to their four-day high as investors covered short positoins, brokers said.

U.S. equity markets rose as signs of urgent moves in Europe to rescue Spain’s troubled banks sparked a rebound in beaten-down shares, pushing the broad S&P 500 index through a key resistance level.

In the commodities sector, metals, energy, grains and other softs markets pushed the global benchmark Thomson Reuters-Jefferies CRB index up 1.25 percent.

“Today’s market is truly a rising-tide-lifts-all-boats kind of market,” said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.

Commodities posted their biggest rebound in more than three months, also on growing hopes for a solution to the euro zone crisis and a stimulus measure for U.S. growth.

The CRB’s biggest gain since Feb. 21 was won as a rising euro made dollar-denominated raw materials, including cotton, cheaper for users of the single currency.

Short-cover buying spurred cotton prices to session highs, where the contracts closed, a day after falling near a 3-year low for the third consecutive session in the face of bumper supplies and a weak global economic outlook.

Now-benchmark December cotton on ICE Futures U.S. surged 3.00 cents, or 4.59 percent, to end at 68.36 cents per lb, its four-day peak. Contract volume was a hefty 17,092 lots.

On Tuesday, December futures finished at its lowest close for the third position cotton contract since early October 2009.

Spot July cotton surged 3.00 cents, or 4.48 percent, to close at the 69.89 cents a lb high.

Both contracts posted their biggest one-day percentage gains since April 2011.

Jobe Moss, broker at MCM Inc in Lubbock, Texas said he thought most buyers were holding to the sidelines as prices tumbled almost 22 percent during May and early June.

With Wednesday’s surprise advance, he added that a near or medium-term bottom had likely been established, and absentee buyers would should begin returning to the market in coming days.

Moss also noted, however, that rollovers out of July contracts into new-crop December futures would likely begin in earnest on Thursday when Goldman Sachs starts the process with its large holdings of cotton futures.

Open interest, an indicator of investor interest, fell by 2,067 lots to 201,644 lots on June 5, a day after rising to their loftiest level since Feb. 10, 2011, when open interest was at 220,096 lots, ICE data showed.

Wednesday’s volume came to 32,600 lots, about 37 percent over the 30-day norm, Thomson Reuters data showed.

(Reporting by Carole Vaporean; Editing by David Gregorio)

Source: http://www.reuters.com/article/2012/06/06/markets-cotton-idUSL1E8H6HS520120606

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