Bloomberg News

Commodities Head for Biggest Quarterly Drop Since 2008 on Debt

September 28, 2011

Sept. 28 (Bloomberg) -- Commodities fell, heading for the biggest quarterly slump since 2008, as Europe’s sovereign-debt crisis threatened to derail the global economy, slashing raw- material demand.

The Standard & Poor’s GSCI index of 24 raw materials slid 2.7 percent to settle at 603.55 at 3:46 p.m. New York time. Since June 30, the gauge has slumped 9.8 percent, the most since the last quarter of 2008 during the most-severe recession since the 1930s. Copper closed at the lowest price in 13 months, and crude oil fell almost 4 percent.

The MSCI World Index of equities fell for the first time in four sessions amid increasing concern that European leaders are divided on handling the region’s debt woes. A report tomorrow may confirm European consumer confidence dropped to a two-year low in September. Last week, an index of purchasing managers in China indicated that manufacturing contracted.

“Concern for global growth and bad charts have kind of thrown some water on the commodity bull market,” Walter “Bucky” Hellwig, who helps oversee $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview.

The dollar rose for the first time this week against a basket of major currencies, diminishing the investment appeal of raw materials. Confidence among U.S. consumers stagnated in September close to a two-year low as the share of households saying that it was difficult to find a job climbed to the highest in almost three decades, a report said yesterday.

Roubini Outlook

Most advanced nations are lapsing back into recession, while the U.S. is already in the throes of an economic contraction, according to Nouriel Roubini, the chairman of Roubini Global Economics LLC.

The GSCI has slumped 21 percent since reaching a 32-month high on April 11. Today, 21 of 24 components of the gauge dropped, with only cattle prices posted gains.

Copper futures for December delivery fell 19.3 cents, or 5.6 percent, to settle at $3.2465 a pound at 1:16 p.m. on the Comex in New York. Crude-oil futures for November delivery slid 3.8 percent to $81.21 a barrel on the New York Mercantile Exchange.

The drop in copper indicates “the odds of a recession are still apparent,” Adam Klopfenstein, a senior market strategist at MF Global Holdings Inc. in Chicago, said in a telephone interview. “Even if the euro zone gets some money together to cause contagion fears to subside, it still means slower growth in the near term as the world economy is still digesting a deleveraging atmosphere.”

Money managers cut the combined net-long position across 18 futures and options by 20 percent in the week ended Sept. 20, the most since February 2010, data from the U.S. Commodity Futures Trading Commission show.

--With assistance from Chanyaporn Chanjaroen in Singapore and Sherry Su in London. Editors: Patrick McKiernan, Millie Munshi

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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