Aug. 31 (Bloomberg) — Rubber dropped by as much as 4.6 percent as the yen climbed after the Democratic Party of Japan won national elections for the first time, and as a slump in Chinese stocks raised concern the commodity demand may weaken.

Futures in Tokyo retreated after earlier reaching 214.5 yen a kilogram, the highest level for the most-active contract since Oct. 8. The Japanese currency rose to a more-than-one-month high against the dollar, cutting the appeal of the yen-denominated contracts. China’s stocks fell as measures to curb lending threatened to derail an economic recovery.

“Investors are becoming concerned that raw material demand may not be sustained after the effects of governments’ stimulus measures disappear,” Takaki Shigemoto, analyst at Tokyo-based commodity broker Okachi & Co., said today by phone.

February-delivery rubber fell 3.7 percent to settle at 203.2 yen a kilogram ($2,191 a metric ton) on the Tokyo Commodity Exchange, booking the biggest daily loss since Aug. 17. Prices gained 3.9 percent this month, extending a 21 percent increase in July, the best performance since December 2006.

The Japanese currency advanced to 92.75 per dollar as of 3:26 p.m. in Tokyo from 93.60 in New York, after touching 92.55, the strongest level since July 13.

The DPJ routed the Liberal Democratic Party in Japan’s national elections, capturing almost two-thirds of 480 lower- house seats, national broadcaster NHK said. The DPJ has pledged to revive an economy emerging from its deepest recession since World War II by boosting child-care spending, cutting taxes and limiting the power of bureaucrats.

The Shanghai Composite Index slumped 6.3 percent to 2,680.60 at 2:28 p.m. local time. The gauge is down 21 percent in August, heading for its first monthly decline this year and the biggest since October, when it slid 25 percent.

Slowing Growth

Rubber futures also declined as Japanese manufacturers increased output in July at the slowest pace in four months, raising concern that effects of the global stimulus and inventory restocking are fading.

Production climbed 1.9 percent from June, when it rose 2.3 percent, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg News expected a 1.4 percent gain.

July’s increase marked the third month of decelerating growth, signaling a recovery from the nation’s worst postwar recession may be gradual.

“Car sales may stop increasing after incentives from the governments end,” Shigemoto said. “We cannot be so optimistic about the raw material demand.”

Incentives End

The U.S. closed the so-called “cash for clunker” program this month after recording transactions worth $1.9 billion in rebates. The program offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel- efficient vehicles.

January-delivery rubber on the Shanghai Futures Exchange fell by the daily 5 percent limit to 18,070 yuan ($2,645) a ton at 2:31 p.m. local time.

Prices slumped after stockpiles monitored by the exchange increased to the highest since March 2008, raising concern that demand in China, the world’s largest consumer, may be slowing, Shigemoto said.

Rubber inventories increased 7,577 tons to 82,517 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Aug. 28.

Source: Bloomberg

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