Metals, crops and fuel beat stocks, bonds and the dollar for a third straight month, the longest stretch since June 2008, as inflation lifted cotton and cocoa and investors speculated violence in the Middle East and northern Africa will restrain energy supplies.
The S&P GSCI Total Return Index of 24 commodities gained 3.8 percent in February and rose for a sixth consecutive month, the longest streak since 2004, data compiled by Bloomberg show. The MSCI All-Country World Index of equities in 45 nations returned 3 percent including dividends, while corporate and government bonds rose 0.21 percent, according to Bank of America Merrill Lynch’s Global Broad Market Index. The U.S. Dollar Index, a gauge of the currency against six counterparts such as the euro and yen, fell 1.1 percent.
Faster global growth pushed up raw-material prices since September and gains accelerated after riots toppled leaders in Egypt and Tunisia and threatened Libya’s Muammar Qaddafi. At the same time, central banks in emerging economies from China to Russia are raising interest rates and boosting reserve requirements at banks to fight inflation, holding back equities.
“These commodity price increases are staggering,” said Kevin Rendino, a money manager at New York-based BlackRock Inc., which oversees $3.45 trillion. “Each commodity is different, but there is a supply issue for oil. There has been real economic demand for these commodities since the economy began recovering.”
The last time commodities beat stocks, bonds and the dollar for three straight months was June 2008, when the price of oil surged following violence in Iraq. Futures reached a record $147.27 a barrel the next month, and the average price for U.S. regular gasoline at the pump also climbed as high as $4.114.
The S&P GSCI index advanced 1.1 percent at 9:47 a.m. in New York today.
Metals gained in February after reports showed Chinese manufacturing expanded and U.S. factory output beat the most optimistic forecast of economists surveyed by Bloomberg. Silver rose 20 percent last month, the most of any metal in the S&P GSCI index. The Federal Reserve raised its forecast for growth in the U.S., the world’s biggest economy, to a range of 3.4 percent to 3.9 percent, from 3 percent to 3.6 percent.
Oil climbed to the highest price since September 2008 in February. Oil rose after estimates showed exports from Libya, the third-largest producer in Africa at about 1.6 million barrels of oil a day, was cut. Barclays Plc said output was reduced by more than 1 million barrels a day, while the International Energy Agency said output was down 850,000 barrels. Clashes between Qaddafi and rebels intensified in the second half of February. Futures gained 5.2 percent to $96.97 a barrel in New York last month, reaching $103.41 on Feb. 24.
Cotton advanced 14 percent to a record $1.9123 a pound, leading gains in crop prices. Production in China, the world’s biggest importer, fell 6.3 percent to 5.97 million metric tons last year, the third consecutive drop, data from the National Bureau of Statistics in Beijing show. Futures have risen 32 percent in 2011 through February, the biggest gain to start a year, according to Bloomberg data starting in mid-1959.
Rising commodities are feeding inflation. Brazil’s price increased to 6.08 percent in the 12 months through mid-February, the fastest rate in more than two years. India’s benchmark wholesale inflation rate averaged 9.4 percent in the nine months through December, the most in the past decade, the finance ministry said in a report on Feb. 25.
“The dominant influence with regard to strength in commodities is equally split by global demand and dollar weakness,” said Liam Dalton, president of Axiom Capital Management Inc. in New York, which oversees $1.4 billion. “In terms of traditional inflation in the U.S., we have a very tough time getting that going right now, whereas in some of the overseas markets like China, India and Brazil, there is potential for inflation because of tremendous organic demand.”
Equities returned 3 percent worldwide including dividends in February, led by energy companies. While all 10 industries in the MSCI All-Country index advanced, the energy group rose the most with a 6.4 percent gain, keeping it as the best-performing group since the market’s lows in July. Pride International Inc., a drilling contractor, climbed 28 percent, and Rowan Cos., the oil and natural-gas driller that also builds rigs, advanced 24 percent.
Corporate bonds worldwide rose 0.67 percent last month, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The advance was the first after three straight monthly declines.
High-yield, high-risk, or junk, bonds returned 1.42 percent, following a gain of 2.17 percent in January, according to the Bank of America Merrill Lynch Global High Yield Index. Speculative-grade bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
Treasuries, the benchmark for borrowing costs around the world, lost 0.05 percent. The drop was reduced by the biggest weekly gain since May as unrest in Libya drove investors to the safety of U.S. government debt and raised concern that surging oil prices may derail the economic recovery. Treasuries climbed 0.01 percent in January, lagging behind the 5.9 percent return in 2010.
Safety of Treasuries
“In the beginning of February, there was clearly a trend out of the relatively safe Treasuries market,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “But since then we’ve seen that trend reverse given the geopolitical uncertainties associated with the crisis in the Middle East.”
The Dollar Index dropped 1.1 percent, following a 1.6 percent loss in January. The South African rand was the best-performing currency in February, gaining 3.2 percent against the dollar. New Zealand’s dollar performed worst, losing 2.7 percent.
“The markets are sending us a message,” said Hugh Johnson, who oversees $1.92 billion as chairman of Albany, New York-based Hugh Johnson Advisors LLC. “The message is that oil prices are going to go higher. We’re talking about possible interruption of oil flows and possibly higher oil prices and that will have an impact on the economy.”