BLBG:Commodities From Gold to Oil Slump on Fed Outlook, China Crunch
Commodities tumbled by the most in six weeks as everything from gold to crude oil and copper dropped on concern that the Federal Reserve may phase out stimulus and as China’s cash crunch worsened.
The Standard & Poor’s GSCI Index of 24 raw materials lost as much as 1.9 percent to 623.89, the biggest intraday loss since May 10, before reaching 624.42 at 5:20 p.m. in Singapore. Gold for immediate delivery fell as much as 3.4 percent to $1,304.75 an ounce, the lowest since 2010, and silver plunged 6.2 percent. Crude oil dropped 2.2 percent to $96.08 a barrel and copper declined 2.1 percent $6,814.25 a metric ton. Wheat lost 1.5 percent to $7.0325 a bushel.
Chairman Ben S. Bernanke said the Fed may start tapering bond purchases that have fueled gains in markets globally, and end the program in 2014 should risks to the economy abate. China’s benchmark money-market rate climbed to a record and a private report showed manufacturing shrank at a faster pace, spurring concerns that demand is slowing in the world’s biggest consumer of energy and metals.
“Investors are taking a risk-off position,” Rico Gomez, who helps manage $2.8 billion at Rizal Commercial Banking Corp. (RCB), said in Manila. “Some investors are staying on the sidelines on the thought that cheap money is coming to an end.”
The preliminary reading of 48.3 for a Chinese Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
China, Fed
China’s seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2006 today as slowing economic growth, a crackdown on illegal capital inflows and efforts to rein in shadow banking contributed to increased borrowing costs. China’s central bank has refrained from using reverse-repurchase agreements to inject funds into the interbank market since Feb. 7.
The pace of Fed bond purchases, currently at $85 billion a month, will be influenced by economic data, Bernanke said.
“The committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year” if economic data are broadly consistent with the Fed’s forecast, Bernanke said at a press conference in Washington. “And if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”
Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, fell below 1,000 metric tons for the first time in four years, wiping $30 billion from the value of the fund in 2013.
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
