Commodities surge; stocks, dollar arrest falls

An ailing dollar also won brief respite from successive falls to record lows versus the euro and a basket of major rival currencies, as euro zone officials expressed concerns about the single currency's sharp rise.Â

The greenback's recent woes have added fresh fuel to fired-up commodity markets, raising the allure of dollar-denominated resources including gold, platinum, food commodities and crude oil for non-U.S. investors. Spot platinum, elevated by solid fundamentals as well as investment interest due to a power crisis in top producer South Africa, hit a record $2,243 per ounce. while oil held near $102 a barrel, off a record near $104 posted in the previous session.

The Baltic Exchange's chief sea freight index, which gauges the strength of major trade routes for bulk commodities, has powered up by an eye-watering 40 percent in the last six weeks.

Analysts said current lofty levels were not a deterrent to further gains, with global economic uncertainty hastening the need for portfolio diversification into commodities. "I think we can drop the word 'alternative' from commodities now," said Ross Norman, managing director of TheBullionDesk.com. "This year is psyching itself up to be the year that inflation re-emerges as a major topic. In that scenario people are looking to invest in hard assets that hold their value better than some other financial products -- commodities do very well in that environment," he said.

Although gold hit a record above $980 per ounce on Monday and is on track to reach $1,000, the metal is still some way off the inflation-adjusted high of $2,187 per ounce, which expresses the 1980 record high of $850 in today's money.

STOCKS, DOLLAR SNAP FALLS

The commodity market surge helped stock markets break a string of recent declines. Japan's Nikkei benchmark average rebounded from a six-week low to close flat.

European shares edged up early after four days of losses, led by mining stocks. Miners Anglo American, Rio Tinto and Lonmin rose between 0.9 and 1.2 percent. The FTSEurofirst 300 index of top European shares was up 0.45 percent at 1,304.05 points, echoing a modest late rally in U.S. equities on Monday that left Wall Street flat.

The dollar had plumbed record lows versus the euro and a basket of currencies for five straight sessions as worries about the U.S. economy sapped sentiment, but euro zone officials broke the malaise with concerns about the single currency's climb. The euro's surge beyond $1.50 prompted verbal intervention by euro zone finance ministers as well as European Central Bank President Jean-Claude Trichet.

In an indication of how seriously the ECB is taking recent euro appreciation, Trichet broke with tradition and spoke outside a formal news conference and stressed that Washington favoured a strong dollar. "This is the first time that Trichet has backed up the case of finance ministers and the fact the ECB are showing solidarity with this verbal intervention, shows that Europe is taking a different tack," said Adam Myers, strategist at Credit Suisse.

The euro stood at $1.5189, down 0.1 percent on the day, but still fairly close to the $1.5275 high set the previous session according to Reuters data. The dollar's trade-weighted index against six major currencies was at 73.712, slightly above the 73.354 it hit on Monday, its lowest level since it was created in 1973.