Commodities Erase Gain for Year in Worst Run Since 2008
Monday, 14 May 2012 | 00:00
Commodities fell for an eighth straight session, wiping out gains for the year, after data from Asia showed a further slowdown in industrial output and JPMorgan Chase & Co. (JPM) said that it had a $2 billion trading loss.
The Standard & Poor’s GSCI Spot Index of 24 commodities posted its longest slump since December 2008 and dropped to 640.46, the lowest since Dec. 22. The measure fell 0.8 percent to settle at 642.58 at 3:53 p.m., down 0.4 percent since Dec. 31. The last annual decline was in 2008, before a rally that saw the gauge double over the next three years.
Twenty-one of the raw materials tracked by the GSCI fell, led by cotton, soybeans and lead. Crude oil and copper capped their second straight weekly losses after industrial output slowed in China and shrank in India, adding to concerns that economic growth is stalling as Europe struggles with a debt crisis. Jamie Dimon, JPMorgan Chase’s chief executive officer, said that the bank made egregious mistakes trading derivatives.
“The optimism we had at the end of 2011 that created a firm footing for a lot of commodities has slowly eroded,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “The outlook remains mixed to negative.”
Crude-oil futures for June delivery declined as much as 1.6 percent to $95.56 a barrel on the New York Mercantile Exchange and closed at $96.13, the lowest settlement since Dec. 19. Crude accounts for 51.4 percent of the GSCI Spot Index, according to weightings on Standard & Poor’s Ratings Services’ website.
Copper futures for July delivery fell as much as 2 percent to $3.6165 a pound on the Comex in New York, before settling at $3.648. Spot gold fell as much as 1.3 percent to $1,573.82 an ounce, the lowest since Jan. 3.
China’s industrial output rose 9.3 percent in April from a year earlier, according to data today, compared with the 12.2 percent median estimate in a Bloomberg News survey of 32 economists and 11.9 percent in March. Production in India unexpectedly contracted 3.5 percent in March.
The S&P GSCI declined in March, April and this month, overturning gains for the year of as much as 11 percent, as growth in China, the largest user of energy and metals, expanded in the first quarter at the slowest pace in almost three years. Over the past decade, the index had its sole annual loss in 2008, tumbling 43 percent, as the world economy sank in recession.
The euro slid to a three-month low before Italy, Spain and France sell bonds next week amid concern the debt crisis is deepening, with Greek leaders unable to form a government since May 6. The currency, which was at $1.292, is set for a second straight weekly loss. More than 50 percent of investors predict a nation will exit the euro this year, according to a Bloomberg Global Poll.
‘Time to Resolve’
“Regardless of whether Greece exits the euro, it will take a lot of time to resolve the region’s debt crisis,” said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co.
Commodity exchange-traded products had $1 billion outflows in April, led by withdrawals from precious metals and energy, Societe Generale SA analysts led by Alain Bokobza said yesterday. “Commodities saw large outflows last month due notably to the gradual landing of the Chinese economy,” they wrote in a report.
Inflation in China was 3.4 percent in April, below the government’s full-year target for a third month, the National Bureau of Statistics said today. That may give Premier Wen Jiabao more leeway to stimulate the economy.