Hedge funds cut bullish positions most in four months

Reserve Requirements

Governments pledged more than $430 billion in fresh money to the IMF to help it protect the global economy against the turmoil in Europe, the Group of 20 nations announced when their finance chiefs met in Washington on April 20. The Bank of Japan is “committed” to monetary easing to shore up the economy, Governor Masaaki Shirakawa said April 18.

China’s benchmark Shanghai Composite Index rose 2% last week on speculation that the government will increase fiscal spending on infrastructure and cut banks’ reserve requirements to bolster economic growth. China accounts for 40% of copper consumption and 11% of oil demand, Barclays Capital and the International Energy Agency estimate.

“China will look at some kind of easing,” said Wiktor Bielski, the London-based global head of commodities research at VTB Capital, which manages $2.8 billion of assets. “We will see acceleration in Chinese growth and we are already asking customers to buy those commodities in which China faces a shortage.”

China’s economy expanded 8.1% last quarter, the slowest pace in almost three years, the government said April 13. Chinese Premier Wen Jiabao cut the nation’s economic growth target to 7.5% last month, the lowest since 2004.

Cotton Prices

A measure of 11 U.S. farm goods showed speculators lowered wagers on a rally in agricultural commodities by 17% to 556,164 futures and options, the biggest slump since Jan. 17.

Speculators have a net-short position of 14,786 contracts in coffee, the most bearish since December 2008, the CFTC data show. Bets on lower cotton prices more than doubled to 7,543. Wagers on a sugar rally tumbled 36% to 68,379, the biggest cut since December 2008.

Sugar prices slumped to a 10-month low April 20 on signs of increasing supplies from Brazil, the world’s biggest exporter. Shipments from the South American country may climb 2.4% in the season starting May 1, a unit of the U.S. Department of Agriculture said last week.

“We are already in a correction mode,” said Steve Mathews, the chief investment officer of Flintlock Capital Asset Management LLC in New York, which manages $116 million of assets. “The overall mood is bearish. There is a large debt overhang which needs to be resolved before we can have any sustained healthy economic performance.”

Bloomberg News


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