Commodities volatile on $100-oil talk, Wall Street falls

By Hilary Russ

NEW YORK (Reuters) - Talk that Saudi Arabia has its sights on $80-$100 a barrel oil again and of more U.S. sanctions on Russia triggered wild swings in trading of commodities on Thursday, though the potential boost to inflation hit fixed-income assets.

Wall Street equity indexes fell in choppy trading on a broad-based slump in technology stocks and a tumble in consumer staples, while higher bond yields supported a steady U.S. dollar.

After Brent crude futures climbed past $74 a barrel overnight, the Thomson Reuters CoreCommodity total return index opened on Thursday near its highest level since mid-2015, before giving back all its gains.

The surge came on a Reuters report that OPEC's new price hawk Saudi Arabia would be happy for crude to rise to $80 or even $100, a sign Riyadh will seek no changes to a supply-cutting deal even though the agreement's original target is now within sight.

After jumping nearly 3 percent overnight, Brent was at $74.40 per barrel, up 1.25 percent on the day. U.S. crude rose 0.73 percent to $68.97.

The leap in the price of oil, combined with fears that sanctions on Russia could hit supplies of other commodities, energized the entire sector.

"It has been a very erratic day, it's a bit crazy," said Rabobank metals sector economist Casper Burgering. "Nickel went up by almost 10 pct and aluminium by almost 8 percent and now are coming right back down." Expect more volatility, he said.

However such increases, if sustained, could fuel inflationary pressures. Investors hedged by selling sovereign bonds.

Nickel initially jumped by the most in 6-1/2 years on talk Nornickel - the world's second-biggest producer of the metal - could be impacted. [MET/L]

But nickel then turned negative, dropping as much as 2 percent in price before regaining some ground.

Aluminium prices reached their highest since 2011, its raw material alumina touching an all-time peak before retreating when Russia floated the idea of a temporary nationalisation of sanctions-hit giant Rusal.

The Dow Jones Industrial Average fell 76.32 points, or 0.31 percent, to 24,671.75, the S&P 500 lost 16.86 points, or 0.62 percent, to 2,691.78 and the Nasdaq Composite dropped 52.82 points, or 0.72 percent, to 7,242.42.

Global resource stocks were the winners from Thursday's romp higher in prices. Chinese blue chips added 1.22 percent; MSCI's broadest index of Asia-Pacific shares outside Japan added 0.74 percent, led by energy shares.

Industrial and commodities-focused stocks also led the pack in Europe though the pan-regional STOXX 600 faded after a two-day rally that had taken it to a six-week high. [.EU]

The bullish sentiment in markets comes amid wider optimism about economic growth. The global economy is expected to expand this year at its fastest pace since 2010, the latest Reuters polls of over 500 economists worldwide suggest, but trade protectionism could quickly slow it down. [ECILT/WRAP]

Investors were also relieved that no new U.S. demands on trade came out of a summit between Japanese Prime Minister Shinzo Abe and U.S. President Donald Trump.

Benchmark 10-year notes last fell 17/32 in price to yield 2.9284 percent, its highest since Feb. 21.

The U.S. dollar was little changed against a basket of major currencies as higher yields and expectations of more Federal Reserve rate increases offset concerns about a trade war and ballooning U.S. budget deficit.[FRX/]

(Additional reporting by Marc Jones and Shadia Nasralla in London, Sruthi Shankar in Bengaluru, Richard Leong in New York; Editing by Bernadette Baum)