Commodities tumbled to a 10-week low on signs that Europe’s worsening debt crisis and a manufacturing slowdown in China may reduce demand for raw materials from metals to energy to food.
The Standard & Poor’s GSCI Spot Index of 24 commodities fell 0.3 percent to settle at 674.44 in New York, after touching 667.98, the lowest since Feb. 7. Cocoa, lead and silver led the declines, with 14 raw materials in the index trading lower. Commodities have retreated 2.1 percent in April, matching last month’s slide.
Euro-area services and manufacturing contracted more than estimated in April, a report showed today, while a Bloomberg survey indicated industrial output in China probably will shrink for a sixth month. Dutch Prime Minister Mark Rutte offered his resignation amid a revolt against spending cuts, while French President Nicolas Sarkozy lost the first round of his re- election bid as the anti-euro National Front won a record share of the vote.
“The outlook is bleak as demand in both developed and developing countries is taking a hit,” said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp., in a telephone interview. “People are in a risk-off mode, and we may see painful unwinding in the short term.”
Euro-area services and manufacturing declined, according to a Market Economics index that fell to a five-month low of 47.4. Economists in a Bloomberg survey projected an increase to 49.3, the median forecast of 17 estimates. HSBC Holdings and Markit reported a preliminary reading of 49.1 for their China purchasing managers’ index, compared with a final 48.3 in March. Readings of less than 50 indicate contraction in both reports.
The dollar jumped as much as 0.6 percent against a basket of currencies, while the MSCI World index retreated as much as 1.8 percent, as Europe’s backlash against budget cuts gained momentum.
“Investors are getting worried about what will happen in France, as progress made by Sarkozy to stem the region’s crisis will be derailed should we see a new government,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview today.
Silver futures for July delivery touched $30.52 an ounce on the Comex in New York, the lowest price since Jan. 20. Copper futures posted the biggest loss since April 13, while crude oil, which dropped 0.7 percent, has declined 8.2 percent in the past year.
Cocoa for July delivery fell 2.9 percent to $2,204 a metric ton on ICE Futures U.S. in New York. Cattle futures for June delivery reached $1.1355 a pound on the Chicago Mercantile Exchange, the lowest for a most-active contract since Sept. 2.
“You are going to see a reduction in the demand side of the equation from the major normal buyers like China,” said Bill Greiner, who helps manage $13 billion in assets as chief investment officer at Mariner Wealth Advisors in Kansas City, Missouri. “Commodities will start to move down in value through the second half of this year.”
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