April 23 (Bloomberg) -- Hedge funds cut their long positions by the most in four months on mounting concern that Europe’s debt crisis will derail global growth and curb demand for raw materials.
Money managers lowered net-long positions across 18 U.S. futures and options by 11% to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show. Bets on rising sugar prices fell the most in more than three years, while the funds anticipate declines in cotton, wheat, coffee and natural gas.
A surge in unemployment from Spain to Italy to Greece is undermining efforts to quell the region’s debt as borrowing costs rise. U.S. industrial production stalled for a second month in March, the Federal Reserve said April 17. Home prices in China fell last month in a record 37 of 70 cities tracked by the government, data showed April 18. The “super cycle” that drove an almost fourfold gain in commodity prices since the end of 2001 may be ending, Citigroup Inc. said last week.
“Concerns about a global slowdown are growing,” said Walter ‘Bucky’ Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “The conditions just aren’t favorable for a commodity rally.”
The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 0.8% last week, led by declines in sugar and gasoline. The MSCI All-Country World Index of equities climbed 0.9% and Treasuries returned 0.2%, a Bank of America Corp. index show.
While commodities are down 2.4% in April, heading for the first two-month slump since September, the GSCI index still is up 120% since touching a five-year low in February 2009, as the economy emerged from recession and demand improved.
Fourteen of the raw materials tracked by the S&P GSCI retreated last week. Sugar tumbled 5.5% for a fourth consecutive loss, while gasoline dropped 6.1%, the most since mid-September. Cotton, Brent crude, Kansas wheat, corn, natural gas and nickel all declined more than 2 percent.
The outlook for demand was eroded partly by dimming prospects in Europe. Spanish two-year notes fell for a seventh week, extending the longest run of declines since January 2007. Spain now has an unemployment rate of 23.6%, compared with an average of 10.8% across the 17-nation euro region.
More Americans than forecast filed claims for jobless benefits in the week ended April 14, the Labor Department said April 19. Sales of previously owned homes unexpectedly dropped in March, data from the National Association of Realtors showed the same day.
Investors put $472 million into commodity funds in the week ended April 18, the most in seven weeks, according to Brad Durham, a managing director at Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Gold and precious-metals outflows totaled $11 million, he said.
The International Monetary Fund raised its global growth forecast for the first time in more than a year on April 17. Industrial production in China expanded 11.9% in March, exceeding economists’ forecasts, the government said April 13.
Hedge funds increased their bets on higher prices for West Texas Intermediate, the U.S. benchmark crude grade, by 3.9%, the first advance in five weeks. Prices rose 0.2% to $103.05 a barrel in New York trading.