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UPDATE 1-China commodities mostly fall as stimulus hopes pared back

Published 05/07/2016, 06:17 pm
UPDATE 1-China commodities mostly fall as stimulus hopes pared back

* Agriculture futures big losers led by rapeseed meal, soymeal

* Iron ore comes off lows after rebar cuts losses

* Nickel firm on potential Philippine mine closures

* China June services activity hits 11-month high (Updates prices, adds analyst comment)

By Manolo Serapio Jr

MANILA, July 5 (Reuters) - Chinese commodities mostly dropped on Tuesday after big gains in the prior session, driven by expectations of stimulus measures to spur economic activity in the world's biggest consumer of raw materials.

But prices came off session lows and some futures rose after a private survey showed China's services sector activity hit an 11-month high in June, indicating that Beijing is making progress in rebalancing the world's No. 2 economy. strength in services could offset some of the weakness in manufacturing, economists say, reducing the urgency for more stimulus.

Given a robust services sector, sentiment towards the Chinese economy "is going to be cautious rather than outright fearful," said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore.

In deciding over stimulus measures, countries were also likely to wait for Britain to make the first move to cushion the impact of its vote to leave the European Union, said Varathan.

"A lot of the stimulus that might come through would probably do so with a bit of a lag primarily because a lot of the policymakers elsewhere don't want to jump the gun," he said.

"It's also unfortunate that the post-Brexit rally on stimulus hopes got stretched a bit too far so the correction is, to some extent, self-inflicted."

Agriculture futures led losses, with soymeal on the Dalian Commodity Exchange DSMcv1 closing down 3.2 percent at 3,360 yuan ($504) a tonne, but off a session low of 3,274 yuan.

The most-traded Dalian soymeal contract hit the highest since at least 2000 on July 1.

Dalian soybeans DSAcv1 dropped nearly 2 percent and rapeseed meal on the Zhengzhou Commodity Exchange CRSMcv1 tumbled 4.5 percent. Dalian corn DCCcv1 slipped 2.5 percent.

Rainy weather over the July 4 holiday weekend in the United States also weighed on corn and soy prices, traders said.

Construction steel rebar on the Shanghai Futures Exchange SRBcv1 closed 0.4 percent lower at 2,402 yuan a tonne after falling more than 4 percent at one point.

Raw materials coking coal DJMcv1 and coke DCJcv1 on Dalian fell nearly 2 percent. But iron ore DCIOcv1 ended 2.1 percent higher at 440.50 yuan per tonne after slipping as much as 2 percent.

Shanghai nickel SNIcv1 was the lone gainer in base metals, rising 3.4 percent amid worries over potential mine closures in the Philippines. The metal surged by its 6 percent upside limit on Monday. rally in Chinese commodities in April soon turned into a rout after exchanges stepped in to curb speculative activity. ($1 = 6.6680 Chinese yuan)

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