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Commodities Extend Slump to 10-Month Low on Europe’s Debt Woes

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Oct. 4 (Bloomberg) -- Commodities declined, extending a slump to a 10-month low, on concern that demand for energy, metals and crops will decline as Europe’s escalating debt woes choke the global economy.

Goldman Sachs Group Inc. cut its global growth forecasts and predicted recessions in Germany and France. European governments hinted that bondholders may be saddled with bigger losses on Greek debt. The Standard & Poor’s GSCI index of raw materials has dropped 24 percent from a 32-month high in April.

“We are seeing continuing pressure across the commodities complex from these concerns about the global growth prospects,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney. “The markets are universally bearish.”

The GSCI measure of 24 components fell 1.6 percent to settle at 576.01 at 3:47 p.m. New York time. Earlier, the gauge touched 572.92, the lowest since Nov. 26. Metals led the decline with silver closing at the lowest price since February and copper at the cheapest settlement in 14 months.

The turmoil in Europe will take away “some of the upside” to commodity prices, not reverse prospects, Goldman Sachs said. The bank lowered its 12-month forecasts for the prices of copper, crude oil and grains.

Last week, the Department of Agriculture said that U.S. grain inventories were bigger than analysts expected. Yesterday, wheat touched a three-month low, and corn was the cheapest since December after the price in September posted the biggest monthly plunge since at least 1959.

“Agricultural commodities are suffering from the ‘risk-off’ flows,” Nic Johnson, who helps manage about $30 billion in commodities at Pacific Investment Management Co. in Newport Beach, California, said in a telephone interview. “They’re really being hurt because of the increase in ending stocks that the USDA updated last week. That really changed fundamentals.”

U.S. equities rallied in the final 50 minutes of trading on speculation that European Union officials are examining how to recapitalize the region’s banks.

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

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

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