Commodities fell the most in a month as gains in the dollar eroded demand for raw materials amid concern that Greece may fail to qualify for more financial aid needed to avoid default.
Greece’s Finance Ministry said it had a “productive and substantive discussion” with international officials who will determine if the country qualifies for further bailout funds. The dollar rose as much as 1.2 percent against a basket of six major currencies, eroding the appeal of raw materials.
“Today was more about dollar strength driven by the deteriorating global economy,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. “Traders were moving away from riskier assets.”
The Standard & Poor’s GSCI Spot Index dropped 14.14, or 2.2 percent, to 638.96, the biggest decline since Aug. 18. Copper futures for December delivery tumbled the most in 10 months, while crude-oil futures for November delivery declined $2.26, or 2.6 percent, to $85.70 a barrel on the New York Mercantile Exchange. The price is down 6.2 percent this year.
“Industrial and end-users and consumers in the wholesale sense are in a wait-and-see mode,” said Gary Mead, an analyst at VM Group in London. “It’s clearly the fact that there’s no decision on the table for the end of the euro crisis. There’s a tremendous amount of fear out there.”
Extending Slump
The S&P GSCI Spot Index has tumbled 5.3 percent this month, after losing 1.7 percent in August. Concerns that there may be an economic slowdown in the euro zone and the U.S. have outweighed the effects of constrained supplies of crude and copper. A report this week may show U.S. home construction dropped to a three-month low.
Finance chiefs from the euro region said last week the 18- month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation. Reports this week on Germany, Europe’s largest economy, are forecast to show a decline in investor confidence and a slowdown in manufacturing.
U.S. President Barack Obama called for $1.5 trillion in tax increases over the next decade to help trim the deficit, and Federal Reserve policy makers will discuss the economy at a two- day meeting starting tomorrow.
Global Traction
Money managers cut their net-long positions in 18 commodities by 5.2 percent to 1.21 million futures and options contracts in the week ended Sept. 13, government data compiled by Bloomberg show. That was the first drop since early August.
“People are becoming more concerned about demand prospects, especially with a weakening economic point of view,” said Michael Banks, a researcher at London-based Hermes Commodities, which manages $1.9 billion in assets. “This economic weakening is pervasive across all markets.”
Gold futures for December delivery dropped 2 percent to $1,778.90 an ounce on the Comex in New York, the lowest closing price since Aug. 25.
Wheat futures for December delivery slipped 2.2 percent to $6.73 a bushel on the Chicago Board of Trade, after touching a two-month low, and soybean futures for November delivery fell 1.4 percent to $13.36 a bushel, capping a six-session slump that was the longest since May 2010.
To contact the reporters on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
