BLBG: Oil, Copper Lead Commodities Lower on Economic Outlook, Dollar
Crude oil and copper plunged, leading commodities to the biggest slump in seven weeks, as the outlook for the economy dimmed and a stronger dollar eroded demand for raw materials.
Oil tumbled as much as 9.6 percent, and copper slid as much as 5.8 percent as the U.S. Dollar Index, a six-currency gauge, gained as much as 1 percent. The Reuters/Jefferies CRB Index of 19 commodities fell 3.9 percent, posting the biggest decline since March 2 and touching the lowest level since April 1.
“There is growing concern that the economy really isn’t turning around yet and that would be concurrent with weak demand for commodities,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “The dollar has been particularly strong today and that’s also hurting commodities, especially crude oil.”
Equity indexes tumbled in New York following six straight weeks of gains on mounting concern that credit losses are worsening. The Conference Board’s U.S. index of leading economic indicators fell more than forecast in March, indicating a recovery from what may be the longest postwar recession isn’t in sight. Federal Reserve Chairman Ben S. Bernanke said on April 17 that the recession’s effects are likely to be “long lasting.”
The CRB fell 8.74 to 217.11, after earlier touching 217.09, the lowest since it reached 217.06 on April 1. The gauge has slipped 5.4 percent this year after posting a record annual decline of 36 percent in 2008 as the global recession eroded consumption. The index has plunged 54 percent from a record high on July 3.
Oil Tumbles
Crude-oil futures for May delivery sank $4.45, or 8.8 percent, to $45.88 a barrel on the New York Mercantile Exchange. That marks the biggest drop since March 2.
“The strength of the dollar has prompted a selling in the oil market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We repeatedly shift from concentrating on the fundamentals of high inventories and low demand on one hand and hopes of recovery later this year. The fundamental picture has reasserted itself today.”
Copper futures for July delivery tumbled 9.25 cents, or 4.2 percent, to $2.105 a pound on the Nymex’s Comex division. The most-active contract has surged 49 percent this year on speculation that a global economic rebound will boost demand, especially from China.
“We had a nice recovery in a lot of the commodities this year on the idea that growth would start to turn around,” Morgan’s Hellwig said. “A lot of that optimism is coming out now as it seems that we have some continuing problems in the financial sector.”
Of the 19 raw materials included in the CRB Index, gold and silver were the only gainers today. The precious metals rose as a slide in U.S. and European equity indexes raised demand for alternative assets. The Standard & Poor’s 500 tumbled 4.3 percent, the most since March 2, while the MSCI World Index slid 3.6 percent, the most this month.
