Speculators cut wagers by the most in 16 weeks as commodities capped the first monthly loss since May on mounting concern that central bank stimulus measures won’t be enough to halt slowing economic growth.
Money managers reduced net-long positions across 18 U.S. futures and options by 5 percent to 1.24 million contracts in the week ended Sept. 25, the biggest slump since June 5, Commodity Futures Trading Commission data show. Crude-oil bets fell the most since May, and cotton holdings reached a six-week low. Bullish wagers on soybeans retreated for a third week, the longest streak since June.
The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 4.6 percent since reaching a five-month high Sept. 14, the day after the Federal Reserve announced a third round of debt buying. U.S. consumer spending stalled in August, and confidence among American shoppers climbed less than expected last month. Demonstrators clashed with police in Madrid last week to protest budget cuts, stoking concern that Europe’s leaders won’t be able to do enough to curb budget deficits.
“The question is: will stimulus be enough, and will it fix it?” said John Kinsey, who helps manage about C$1 billion ($1.02 billion) at Caldwell Investment Management Ltd. in Toronto. “Europe is still in a mess. In the U.S., the economic numbers are still weak. We’re probably still cautious.”
The S&P GSCI dropped 1.4 percent last month, while the MSCI All-Country World Index of equities climbed 2.9 percent. The dollar fell 1.6 percent against a basket of six major trading partners. Treasuries slid 0.3 percent, a Bank of America Corp. index shows. The GSCI gauge gained 0.2 percent at 2:37 p.m. in New York.
The number of contracts outstanding across the 24 commodities tracked by S&P fell to a three-week low on Sept. 26. Soybeans tumbled 8.9 percent in September, the biggest loss among the gauge’s members and the first monthly drop since May. Cotton fell 8.6 percent.
The U.S., the world’s biggest economy, grew at a 1.3 percent pace in the second quarter, down from a previously estimated 1.7 percent, figures from the Commerce Department showed Sept. 27. The Institute for Supply-Management-Chicago Inc. said its business barometer fell to 49.7 this month from 53 in August. A reading of 50 is the dividing line between expansion and contraction.
Commodities jumped 11 percent in the third quarter, the biggest gain since March 2011, as central banks and governments announced plans to promote growth. The Fed said Sept. 13 it would buy $40 billion of mortgage debt a month, and the European Central Bank announced plans on Sept. 6 to buy an unlimited amount of sovereign debt. China last month approved road and subway projects to boost investment.
The GSCI is heading for a fourth consecutive year of gains, surging 91 percent since the end of 2008, after record stimulus measures helped the global economy recover from the worst crisis since the Great Depression. The Fed bought $2.3 trillion of debt in the first two rounds of quantitative easing.
Money managers added $1.56 billion to commodity funds in the week ended Sept. 26, with $1.48 billion going to gold and precious metals, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows.
“I see commodity prices rising,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management, who helps oversee more than $1 billion of assets. “The amount of liquidity in central banks around the world that is being added is significantly greater than anything we’ve seen in history.”
Most raw-material prices “appear to be topping out now for the rest of the year and quite possibly through 2013,” Edward L. Morse, Citigroup Inc.’s global head of commodities research in New York, wrote in a Sept. 24 report. “A major factor is China, where demand has led the commodity boom for the past decade, but lower growth and structural change in the world’s second-largest economy spell looser markets ahead.”
Chinese industrial companies’ profits dropped for a fifth month in August, the National Bureau of Statistics said Sept. 27. International Monetary Fund Managing Director Christine Lagarde said Sept. 24 that global growth may be “a bit weaker” than the Washington-based group forecast in July.
Caterpillar Inc. (CAT), the world’s biggest construction and mining equipment maker, cut its forecast for 2015 earnings on Sept. 24. The company is expecting moderate and “anemic” growth through 2015, Chief Executive Officer Doug Oberhelman told an industry conference in Las Vegas.
Investors reduced bets on a crude-oil rally by 17 percent to 177,762 contracts, the biggest decline since May 8, the CFTC data show. Prices declined 0.8 percent in New York last week, the second straight drop and the longest slump since mid-June.
A measure of net-longs for 11 U.S. farm goods fell 6.3 percent to 725,687 contracts, the CFTC data show. That’s the third weekly decrease and the longest slide since April.
Soybean holdings dropped 6.9 percent to 195,402, the lowest since June 5. Cotton wagers fell 51 percent to 6,356. Prices in New York fell for a fourth week, the longest losing streak since June, amid concern that demand from China will slow.
“We’re going to see a move back down in the entire risk- asset complex and the commodity complex,” said Stanley Crouch, who helps oversee $2 billion as chief investment officer at New York-based Aegis Capital Corp. “You’ve got clear signs of some very fundamental issues with the macroeconomic situation.”
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