Bloomberg News

Commodities Fall to Two-Week Low on Mounting European Debt Woes

December 12, 2011

Dec. 12 (Bloomberg) -- Commodities fell to a two-week low on mounting concern that the European debt crisis will spread after Moody’s Investors Service said it will review ratings for countries in the region.

The Standard & Poor’s GSCI index of 24 raw materials declined 1.3 percent to close at 638.93 at 3:44 p.m. New York time, led by metals. Earlier, the gauge touched 636.8, the lowest since Nov. 25. The measure has dropped 16 percent from a 32-month high in April.

“The market was anticipating a ‘bazooka’ response, and the European meeting did not yield one,” Scott Gardner, the chief investment officer at Verdmont Capital SA in Panama, said in an e-mail. The dollar’s rally and slumping Chinese equities also weighed on raw materials, he said.

Last week’s European Union summit offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said today.

The euro fell to a two-month low against the dollar, and Chinese equities dropped to the cheapest in more than two years. Gold futures tumbled to a six-week low, and copper slumped the most in three weeks. Silver declined 3.9 percent, the biggest slide among GSCI components.

“It appears to me to be a classic ‘risk-off’ day across markets,” James Dailey, who manages $215 million of assets at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in an e-mail. “It also looks like a deleveraging day, which has been signified in the past by gold being caught up in aggressive commodity selling.”

Cocoa Rebounds

Nineteen components in the GSCI index fell. The measure pared losses after cocoa surged the most in two years, snapping the longest slump in five decades.

Corn and wheat prices dropped on forecasts for rising global grain supplies. Soybeans rebounded from a 14-month low on concerns that adverse weather in South America may hurt crops.

Hedge funds cut bullish bets on agricultural prices to the lowest in two years on signs of expanding global supplies.

A measure of speculative positions across 11 products from wheat to coffee to cattle fell 3.6 percent to 258,071 futures and options in the week ended Dec. 6, government data show. That was the lowest since September 2009.

The U.S. said on Dec. 9 that combined global inventories of corn, soybeans and wheat will be 3.2 percent larger than anticipated a month earlier.

Natural gas fell to the lowest in more than two years on forecasts for normal to above-average temperatures in the eastern U.S. through Dec. 22.

Cotton touched to a 15-month low on Europe’s fiscal woes. Futures in New York dropped 3.6 percent, the second-biggest decline among GSCI components, to 87.16 cents a pound.

“All commodity markets are worried about what’s going to happen next in Europe,” Sid Love, the president of Joe Kropf & Sid Love Consulting Services in Overland Park, Kansas, said in a telephone interview.

This year, the fiber has tumbled 40 percent, the largest decline among GSCI prices.

--With assistance from Elizabeth Campbell in Chicago and Naureen S. Malik and Marvin G. Perez in New York. Editors: Patrick McKiernan, Daniel Enoch

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net


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