Commodities drop to 18-month low as slowdown concern deepens

June 4 (Bloomberg) -- Commodities fell to the lowest level in more than 18 months as concern deepened that slowing growth in the U.S. and China may cut demand in the world’s two largest economies.

The Standard & Poor’s GSCI Spot Index lost as much as 1.5 percent to 572.44, the lowest intraday level since Nov. 26, 2010, and was at 574.01 by 10:24 a.m. in London. Crude oil fell to the lowest in almost eight months in New York and copper dropped to cheapest since December.

JPMorgan Chase & Co. cut its forecast for China’s growth in 2012 to 7.7 percent from 8 percent as non-manufacturing industries expanded in May at the slowest pace in more than a year, according to government data. European leaders are divided on solutions for the region’s debt crisis, while U.S. payrolls increased by 69,000 last month, the least in a year and less than the most pessimistic forecast in a Bloomberg News survey of economists, Labor Department figures showed June 1.

“When we see weak numbers in China and very weak job numbers in the U.S., it kicks away at the foundations of the ‘two out of three global regions are OK’ scenario,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. If Europe is dragging Asia and the U.S. into a contraction, that is very bad for oil, he said.

The GSCI commodities index has lost 11 percent this year. Money managers reduced net-long positions across 18 U.S. futures and options by 8.1 percent to 620,715 contracts in the week ended May 29, extending the monthly decline to 26 percent, Commodity Futures Trading Commission data show. Speculators are now the most bearish since the start of year on copper, oil, heating oil, corn, gold and silver.

Oil, Copper

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data.

Crude for July delivery lost as much as 2.3 percent to $81.32 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Oct. 6, before trading at $81.71. Comex copper fell 2.3 percent to $3.238 a pound. Cotton for delivery in December dropped as much as 4.4 percent to 64.61 cents a pound on ICE Futures U.S. in New York, the lowest for the most-active contract since October 2009.

The London Metal Exchange is closed today for a holiday.

Bloomberg News


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