(Bloomberg News) Hedge funds cut their bets on higher commodity prices by the most in four months on mounting concern that Europe's debt crisis will derail global growth and curb demand for raw materials.
Money managers lowered net-long positions across 18 U.S. futures and options by 11 percent to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show. Bets on rising sugar prices fell the most in more than three years, while the funds anticipate declines in cotton, wheat, coffee and natural gas.
A surge in unemployment from Spain to Italy to Greece is undermining efforts to quell the region's debt as borrowing costs rise. U.S. industrial production stalled for a second month in March, the Federal Reserve said April 17. Home prices in China fell last month in a record 37 of 70 cities tracked by the government, data showed April 18. The "super cycle" that drove an almost fourfold gain in commodity prices since the end of 2001 may be ending, Citigroup Inc. said last week.
"Concerns about a global slowdown are growing," said Walter 'Bucky' Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Ala. "The conditions just aren't favorable for a commodity rally."
The Standard & Poor's GSCI Spot Index of 24 raw materials dropped 0.8 percent last week, led by declines in sugar and gasoline. The MSCI All-Country World Index of equities climbed 0.9 percent and Treasuries returned 0.2 percent, a Bank of America Corp. index show.
While commodities are down 2.8 percent in April, heading for the first two-month slump since September, the GSCI index still is up 120 percent since touching a five-year low in February 2009, as the economy emerged from recession and demand improved.