Funds Make Wrong-Way Bets Before Price Slump: Commodities
Speculators raised bullish bets on commodities before signs of Europe’s deepening debt crisis and slowing Chinese growth drove prices lower for a fourth consecutive week, the longest slump since September.
Money managers boosted net-long positions across 18 U.S. futures and options by 9.5 percent to 675,362 contracts in the week ended May 22, government data show. The Standard & Poor’s GSCI Spot Index of 24 raw materials reached a five-month low on May 23. A gauge of net positions for 11 U.S. farm goods surged 21 percent, the most since February, before agriculture prices tracked by S&P posted the biggest weekly loss in eight months.
The euro dropped to the lowest since July 2010 on May 25 after Catalonia’s president repeated his call for Spain’s central government to help regions access funding and S&P cut the credit ratings for five of the country’s banks. China’s biggest lenders may fall short of loan targets for the first time in at least seven years, three bank officials said, and the nation’s State Council refrained from backing Premier Wen Jiabao’s push to expand credit.
“It’s bit a surprising to see so much on the long side, because the trend is down in commodities,” said Walter ‘Bucky’ Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “We’re probably not going to see an extended rally until we get some type of monetary easing. Buying now is an aggressive move. You’re betting on a short-term pop from some sort of resolution in Europe.”
The S&P GSCI index fell 1.4 percent last week and is down 9.4 percent in May, heading for the biggest monthly loss since September. The S&P agriculture gauge tumbled 4.8 percent last week. The MSCI All-Country World Index of equities rose 0.7 percent, and Treasures slid 0.2 percent, a Bank of America Corp. index shows. The dollar rose 1.4 percent against a basket of six currencies, rallying for a fourth week.
Twenty of the 24 raw materials tracked by S&P dropped last week. Corn tumbled 9 percent, the most in a year, and cocoa slumped 7.2 percent, the biggest loss in 2012. Natural gas fell 3 percent today.
A political impasse in Greece, where voters rejected austerity measures in elections on May 6, has raised concern that country may leave the euro. Spain’s government is analyzing “with all caution” requests from regional governments to help them regain access to capital markets, Deputy Prime Minister Soraya Saenz de Santamaria said May 25. Catalonia is one of 17 semi-autonomous regions in the country.
Europe’s crisis risks deepening, damaging the world economy, the Paris-based Organization for Economic Cooperation and Development said in a report May 22.
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