BLBG: Oil, Copper Lead Drop in Commodities to Lowest Since June 2002
Commodities plunged to their lowest level since June 2002, led by energy and industrial metals, on mounting signs that the global recession is deepening and demand for raw materials will decline further.
The Reuters/Jefferies CRB Index of 19 prices dropped for the sixth straight session, the longest slump since December. The gauge touched 203.25, the lowest since June 21, 2002, and has slipped 11 percent this year. Crude oil fell as much as 8.2 percent today, and copper declined the most in three months.
Manufacturing in New York declined in February at the fastest pace on record, and Japan’s economy shrank in the fourth quarter at an annualized rate of 12.7 percent, the most severe contraction since 1974, government reports showed. In 2008, the CRB index fell 36 percent, the most since its debut five decades ago, as recessions hit the U.S., Europe and Japan.
“When the numbers started coming out, whatever hope was left in most commodity markets got pretty well deflated,” said Peter Sorrentino, who helps manage $15.5 billion at Huntington Financial Advisors in Cincinnati. “People are waiting to see the economy begin to pick up, which won’t happen until late this year. Until then, people will continue trading on emotion.”
The CRB index dropped 9.89, or 4.6 percent, to 203.25. The measure, which also includes the prices of crops and precious metals, declined 4 percent in January, the seventh straight monthly slide.
Credit Losses, Stimulus Plan
Governments worldwide are trying to shore up economies saddled with more than $1 trillion in credit losses. President Barack Obama signed a $787 billion stimulus today to boost the U.S. economy. The plan won’t be enough to revive growth and boost demand for industrial commodities, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management.
Crude-oil futures for March delivery fell $2.58, or 6.9 percent, to $34.93 a barrel on the New York Mercantile Exchange, after earlier touching $34.45. Prices are down 22 percent this year.
“The overwhelming focus of the market is the macroeconomic situation, not specific items about oil, which was the case in the past,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “The market-directional cues will come from the economy for quite a while.”
Gold Rallies
Precious metals were the lone commodity gainers. Gold topped $975 an ounce, reaching the highest price since July, on speculation that low interest rates and government spending will devalue currencies, boosting the appeal of bullion as an alternative. Silver and platinum also rose.
“People will continue to go for the precious metals as the safe haven,” Groenwegen of Gold Arrow said. “This is the environment that is good for gold.”
Copper tumbled 7.2 percent in New York today, the most since Oct. 30. Soybeans dropped more than 5 percent on the Chicago Board of Trade, and natural gas closed at the lowest price in two years on the Nymex.
“There’s a view in the markets that the stimulus plan as it stands now is not going to work,” said Tom Hartmann, a commodity analyst at AltaVest Worldwide Trading Inc. in Mission Viejo, California. “We’re definitely seeing deflation in the physical commodities. About the only things up today are gold and the bond market. Everything else is red.”
U.S. equities tumbled to a three-month low, extending a global slump.
