(Bloomberg News) Hedge funds increased bullish bets on commodities by the most since August as evidence that China is accelerating outweighed concern that U.S. lawmakers have yet to resolve an impasse over automatic spending cuts and tax rises.
Speculators and money managers increased net-long positions across 18 U.S. futures and options by 9.8 percent to 929,588 contracts in the week ended Nov. 27, the biggest gain since Aug. 21, U.S. Commodity Futures Trading Commission data show. Gold holdings reached a six-week high, and wagers on a wheat rally jumped the most since June. Cattle bets more than doubled. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 1.9 percent in November, the first monthly gain since August.
The world economy is in its best shape in 18 months because of the acceleration in China, the biggest consumer of everything from cotton to copper to coal, according to the Bloomberg Global Poll of 862 investors last week. The U.S. probably will avoid the so-called fiscal cliff that the Congressional Budget Office has warned risks sending the country back into recession, even as Europe remains mired in a debt crisis, the poll showed.
“I wouldn’t say that it was a green light all ahead for commodities, but the market is turning slowly based primarily on improved real numbers out of China that outweigh slowdowns in Europe and the U.S.,” said Adrian Day, who manages about $170 million of assets as president of Adrian Day Asset Management in Annapolis, Maryland. China is “overwhelmingly the most important factor,” he said.
The S&P GSCI rose less than 0.1 percent last week, led by gains in industrial metals and agriculture. The MSCI All-Country World Index of equities advanced 0.9 percent and the dollar fell 0.1 percent against a basket of six trading partners. Treasuries returned 0.4 percent, a Bank of America Corp. index shows. The GSCI climbed 0.3 percent to 651.83 at 11:45 a.m. in New York.
The U.S. economy, the world’s biggest, expanded 2.7 percent in the three months ended Sept. 30, more than economists forecast, according to Commerce Department data on Nov. 29. The S&P/Case-Shiller index of property values in 20 U.S. cities showed that home prices in the 12 months ended September advanced by the most since July 2010.
Confidence in China’s economy rose to the highest in more than a year amid optimism that the new leadership headed by Xi Jinping will improve the financial climate, according to the Bloomberg investor poll. Manufacturing in the country rose to the highest level in seven months in November, the National Bureau of Statistics said Dec. 1.
A deadlock between President Barack Obama and Republicans in Congress over $600 billion in spending cuts and tax increases has extended over a year. Missing the deadline at the end of December means the economy goes over the so-called fiscal cliff and probably will tumble into a recession, the Congressional Budget Office reiterated Nov. 8.