BLBG:Commodities Fall To Lowest Since 2010 As Fed Cuts Outlook
Commodities dropped to the lowest level in almost 19 months after the Federal Reserve lowered its growth outlook for the world’s largest economy and a pledge to extend its stimulus program fell short of expectations. China’s manufacturing data signaled a slowdown for an eighth month.
The Standard & Poor’s GSCI Spot Index of 24 commodities fell for a second day, losing as much as 1.1 percent to 569.23, the lowest since November 2010, and was at 570.47 by 1:34 p.m. in Singapore. Raw materials will enter a bear market if they finish at that level today as the measure would be 20.3 percent below its Feb. 24 closing high. Crude oil declined to the cheapest in eight months.
Fed officials cut their 2012 estimate for economic growth to between 1.9 percent and 2.4 percent from 2.4 percent to 2.9 percent, and extended a program of replacing short-term bonds with longer-term debt by $267 billion through the end of the year to lower borrowing costs and boost the economy. The central bank said it stands ready to take further action.
“It’s a little bit of a disappointment,” Alexandra Knight, a commodity analyst at National Bank of Australia Ltd., said by phone today from Melbourne. “Market participants are underwhelmed because of no mention of another round of quantitative easing.”
Commodities gauged by the GSCI Index rallied 92 percent during the time when the Fed bought $2.3 trillion of debt in two rounds of easing from December 2008 to June 2011.
Manufacturing in China, top user of energy and metals may shrink for an eighth month in June. The 48.1 preliminary reading for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 shows expansion.
Crude futures also declined after stockpiles unexpectedly climbed 2.9 million barrels last week to 387 million, the most since July 1990, according the U.S. Energy Department. Oil for August delivery fell to $80.11 a barrel, the lowest price for a front-month contract since October in electronic trading on the New York Mercantile Exchange.
Corn for December delivery slid 2.3 percent to $5.5375 a bushel on the Chicago Board of Trade. Copper for three-month delivery lost 1.5 percent to $7,430 a metric ton on the London Metal Exchange.
To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
