Investors reduced commodity holdings for seven straight sessions, the longest slide since November, a possible sign that a rally in prices may be short-lived amid mounting concern that global growth will slow.
Open interest, or the number of contracts outstanding, in the 24 commodities tracked by Standard & Poor’s, fell 2 percent in the seven sessions through April 30, according to data compiled by Bloomberg. Holdings have dropped even as the S&P GSCI Spot Index rallied for six sessions to a three-week high yesterday. The gauge may slump 4.2 percent by the end of July, according to First Asset Investment Management Inc.
“We are looking at a situation where there is constant tug of war in the U.S. between good and bad data and a crisis-like situation in Europe,” John Stephenson, who helps manage $2.7 billion of assets at First Asset Investment Management Inc. in Toronto. “People are still trying to figure out about China, so there is caution.”
The commodity gauge, which includes raw materials from gold to copper to crude oil, declined for a second straight month in April, the longest slump since September. Prices have dropped as Europe’s debt crisis intensified and reports showed the U.S. economy may be stalling. Money managers have cut their wagers on a raw-materials rally by 29 percent since reaching this year’s peak on Feb. 28, government data show.
The S&P GSCI index fell 1.3 percent to settle at 678.65 in New York, the biggest decline since April 10. Yesterday, it touched 689.04 yesterday, the highest since April 5. The gauge may decline to 650 by end-July, First Asset Investment’s Stephenson said.
Raw sugar led the commodity decline in April, losing 11 percent, as supplies are set to exceed demand by 6 million tons in 2011-2012, according to an estimate by the International Sugar Organization. The most-active contract fell 0.2 percent today to 20.91 cents per pound on ICE Futures U.S. in New York.
Raw materials will “drift lower” this quarter as central banks in the U.S. and Europe refrain from adding additional stimulus, removing the driver that helped lift prices in the first three months, said UBS AG, Switzerland’s largest bank.
Manufacturing expanded in China and the U.S., data showed yesterday, signaling an economic rebound in the two top consumers of raw materials. The U.S. Institute for Supply Management’s factory index climbed to 54.8, the best reading since June. Readings greater than 50 signal growth.
“Improving manufacturing conditions are likely to delay any loosening policies,” said Zhang Sida, an analyst at Shanghai Dalu Futures Co., referring to China.
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