Commodities Fall as Chinese Manufacturing Expansion Slows

Commodities dropped, led by silver, copper and gasoline, after data showed manufacturing growth is expanding at a slower pace in China, the world’s biggest consumer of metals and energy.

The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped as much as 1.1 percent to 602.13. It traded at 608.49 at 11:59 a.m. in New York. The GSCI touched 596.36 on April 18, the lowest level since July 2. Silver tumbled as much as 3.3 percent today, copper fell 2.4 percent and West Texas Intermediate crude lost as much as 1.6 percent.

Commodities measured by the S&P GSCI are headed for the worst month in almost a year on concern that a slowdown in Chinese growth will curtail demand. The preliminary reading of 50.5 this month for a Purchasing Managers’ Index (EC11CHPM) released by HSBC Holdings Plc and Markit Economics was down from a final 51.6 for March. Euro-area services and factory output shrank for a 15th month in April, a separate report from Markit showed.

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“Industrial demand is going to be weak, which is bearish for metals such as copper and silver,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “There are concerns about reduced petroleum demand because of the PMI numbers from China and the euro zone.”

Gold, silver and copper fell into a bear market this month as China’s economic growth slowed to 7.7 percent in the first quarter from 7.9 percent in the previous three months. The country represented 41 percent of global copper consumption in 2012, according to Barclays Plc.

European Contraction

A composite index based on a survey of purchasing managers in euro-area services and factories held at 46.5, London-based Markit said today, in line with the median of 26 economists’ forecasts in a Bloomberg News survey. A reading below 50 indicates contraction.

Goldman reduced its forecasts for oil and coffee amid prospects for weak demand from China to Europe. The bank also exited a bet on lower gold prices.

Silver futures for July delivery were down 2.4 percent to $22.81 an ounce at 11:09 a.m. on the Comex in New York, taking this year’s decline to 24 percent, the most on the GSCI gauge.

Copper futures for delivery in July declined 2.5 percent to $3.119 a pound on the Comex. The price reached $3.0685, the lowest since October 2011.

Morgan Stanley and JPMorgan Chase & Co. are among banks that say declines in raw-material prices may be temporary.

“The commodity supercycle has a decade left in it,” Michael Camacho, JPMorgan’s London-based chief executive officer of commodities for Europe, Middle East and North Africa, said on April 16. The “mid-cycle pause” may last for 12 more months, he said.

Gasoline for May delivery slipped 3 cents, or 1.1 percent, to $2.7394 a gallon at 11:59 a.m. on the Nymex. West Texas Intermediate crude for June delivery rose 8 cents to $89.27 a barrel. Brent oil for June settlement decreased 13 cents to $100.26 a barrel on the London-based ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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