Speculators hold positions at 11-month high amid rally

Aug. 20 (Bloomberg) -- Speculators held positions on rising commodities near the highest in 11 months as speculation that China will act to bolster its economy and signs of improving U.S. growth boosted prices for a third consecutive week.

Money managers’ net-long position across 18 U.S. raw materials was little changed at 1.2 million futures and options in the week ended Aug. 14, U.S. Commodity Futures Trading Commission data show. Investors increased bets on costlier corn, soybeans and cattle amid the worst U.S. drought in 56 years, reduced wagers on a rally in crude oil and became more bearish on the outlook for copper.

Chinese Premier Wen Jiabao said there’s “growing room for monetary policy operation” amid easing inflation, state television reported Aug. 15. Confidence among U.S. consumers unexpectedly improved in August and an index of leading indicators climbed more than forecast in July, separate reports showed Aug. 17. China is the world’s biggest consumer of everything from copper to pork to soybeans, and the U.S. is the largest user of crude and corn.

“China saying they’re going to have more economic stimulus is going to have as much of an effect on commodities as actually doing it,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management who helps oversee more than $1 billion of assets. “It’s going to psychologically increase where people think commodities should be priced.”

Feeder Rally

The Standard & Poor’s GSCI Spot Index of 24 commodities gained 1.7 percent last week, the most since July 20. The MSCI All-Country World Index of equities advanced 0.7 percent, and the dollar added 0.1 percent against a measure of six major trading partners. Treasuries lost 0.8 percent, a Bank of America Corp. index showed. The GSCI gauge slid 0.4 percent to 665.12 at 10:12 a.m. in New York.

Thirteen of the 24 commodities tracked by S&P rose last week, led by crude and heating oil. Feeder-cattle futures jumped 1.9 percent, the most since mid-May.

The People’s Bank of China may cut benchmark interest rates before altering the required reserve ratios for lenders, because the latter tends to act for a longer period, the Securities Times reported Aug. 17. The country decreased the reserve- requirement ratio for banks three times since November and lowered interest rates in June and July while accelerating approvals for investment projects.

U.S. building permits, a proxy for future construction, increased to an 812,000 annual pace in July, the most since August 2008, the Commerce Department said Aug. 16. Production at factories, mines and utilities increased 0.6 percent in July following a 0.1 percent gain the prior month, Federal Reserve data showed Aug. 15.

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