Commodities: Base metals bounce, but analysts still wary about Turkey

News that Beijing and Washington were moving openly to restart trade talks and that Chinese officials were reining in the ability of the nation's banks to facilitate short-selling the yuan buoyed the commodities complex on Thursday.

An extension of the prior session's rally in the Turkish lira also helped to buoy sentiment around the Emerging Markets space.

A report from Reuters, citing sources with direct knowledge of the matter, said lenders would no longer be able to deposit and lend the Chinese currency via free trade zone schemes.

Beijing's actions to rein-in liquidity in the offshore yuan saw the Greenback fall by 0.71% to 6.8853 versus the yuan, which in turn saw the US dollar spot index slip 0.06% to 96.6390.

The reprieve from dollar strength was enough to lure some traders back into the market, with all the main LME-traded base metals futures contracts staging a bounce after sharp selling on Wednesday.

Three-month LME copper for instance finished the session at $5,938 per metric tonne, having started the day from $5,828.

Gold for next month delivery on the other hand continued to slip lower, dipping 0.35% to 1,180.90/oz..

Energy futures were also on the rebound, with West Texas Intermediate trading higher by 0.69% to $65.46 a barrel on NYMEX.

To take note of however, while Allianz chief economic adviser, Mohamed El-Erian, appeared to give a resolution of the China-US trade spat the benefit of the doubt, he was more cautious when it came to the outlook for Turkey.

In remarks to Boloomberg, El-Erian said: "Turkey is trying to rewrite the crisis management chapter in the playbook for emerging markets. It’s trying to go without interest rate hikes. It’s trying to do it without the IMF. That’s hard. It’s not impossible, but it's hard.

For his part, Wei Li, BlackRock Inc.'s head of iShares EMEA strategy in London, chipped in: "The market turmoil in Turkey is the latest in a series of fragilities amplified by gradually tightening financial conditions this year. Investors should prepare for further bouts of volatility ahead."