By M. Shankar May 25 (Bloomberg) -- Sugar futures retreated in New York and London as the dollar strengthened, dimming the appeal of commodities as an alternative investment, on concern Europe’s sovereign-debt crisis may spread. The U.S. Dollar Index, a six-currency gauge of the greenback’s value, rose for a second day. Raw materials from copper to corn slid, driving the 24-commodity S&P GSCI Total Return Index as much as 3 percent lower. The MSCI World Index of shares declined for an eighth day in nine. “Sentiment is driving the market,” Eugen Weinberg, head of research at Commerzbank AG in Frankfurt, said by phone. “There is a rise in risk aversion and concern about the possible outcome of the European debt crisis.” Raw sugar for July delivery dropped 0.37 cent, or 2.4 percent, to 14.82 cents a pound on ICE Futures U.S. at 8:09 a.m. in New York. The contract fell as much as 3.4 percent to its lowest price since May 19. White, or refined, sugar for August delivery slid $9, or 1.8 percent, to $490.80 a metric ton on the Liffe exchange in London. The sweetener declined as much as 2.3 percent, the most since May 14. The dollar index climbed as much as 1.5 percent, extending yesterday’s 1 percent gain. A stronger dollar makes raw materials priced in the currency more expensive in terms of other monies. ‘Dollar Strength’ “With the general economic landscape still fraught with dollar strength, it seems hard to get excited on the bull side,” Thomas Kujawa, co-head of the soft-commodities department at Sucden Financial Ltd. in London, wrote in a note e-mailed today. Sugar prices doubled last year as excess rains in Brazil and a weak monsoon in India hurt sugar-cane output from the world’s two biggest growers. A slumping dollar also helped to boost commodities in 2009. Refined sugar has dropped 30 percent this year and raw sugar has lost 45 percent, while the dollar index has advanced 12 percent. Cocoa for July delivery fell 1 percent to $2,885 a ton on ICE. The chocolate ingredient for July delivery advanced 0.5 percent to 2,350 pounds ($3,366) a ton on Liffe. Arabica coffee for July delivery dropped 0.8 percent to $1.3115 a pound on ICE. Robusta beans for July delivery lost 0.8 percent to $1,320 a ton on Liffe. To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net.

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