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Commodities Drop on Demand Concerns Amid Europe Discord on Debt

Commodities fell, heading for the first monthly decline since May, as discord over Europe’s debt crisis and fading business optimism in China pointed to a deeper slowdown that may reduce demand for energy, metals and grains.

The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 0.9 percent to settle at 657.68 at 4 p.m. New York time, led by cocoa, silver and aluminum. The gauge slid 4.4 percent last week, the most since June 1, and has dropped 2.6 percent this month.

Germany and France disagreed on a timetable to introduce joint oversight of banks, a deadlock that may delay resolution of the euro-area debt crisis. China’s manufacturers and retailers are less optimistic about sales than they were three months ago and are cutting jobs, according to the findings of a survey by New York-based researcher CBB International LLC.

“The market wants to see proof that Europe is climbing out of the doldrums,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “The market has become a lot more pessimistic.”

Cocoa for December delivery declined 3 percent to $2,446 a metric ton on ICE Futures U.S. in New York, the biggest drop since July 12.

Silver futures for December delivery slid 1.9 percent to $33.984 an ounce on the Comex in New York, the largest fall since Aug. 2. Aluminum in London declined 1.7 percent.

Crude-oil futures for November delivery fell 1 percent to $91.93 a barrel on the New York Mercantile Exchange. Last week, the price tumbled 6.2 percent, the most since June.

Hedge Funds

Money managers and hedge funds cut their net-long positions across 18 U.S. futures and options by 1.7 percent to 1.307 million contracts in the week ended Sept. 18, halting two weeks of gains that had sent holdings to a 16-month high, U.S. Commodity Futures Trading Commission data show.

The China Beige Book, a survey modeled on the U.S. Federal Reserve’s Beige Book, said manufacturing was the area with the biggest declines at companies reporting higher revenue and higher output. China is the world’s biggest consumer of everything from copper to pork to soybeans.

“The dramatic and unexpected worsening of the European crisis and slowing of America’s economy brought China’s export order growth to a near-standstill,” said Craig Charney, research director for the China Beige Book.

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net; Rachel Morison in London at rmorison@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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