Investors cut wagers on a rally for commodities to the lowest in almost four years and pulled a record $4.23 billion from funds last week as prices erased this year’s gain on a slowdown for manufacturing in China.
Hedge funds and other large speculators reduced net-long positions across 18 U.S. futures and options in the week ended Feb. 26 by 16% to 447,106 contracts, the lowest since March 2009, U.S. Commodity Futures Trading Commission data show. Investors are betting on a decline in copper prices for the first time since November, and reduced their crude-oil holdings by the most in 11 weeks.
Manufacturing in China, the top consumer of cotton, copper and soybeans, expanded at the weakest pace in five months in February, the government said March 1. In Europe, which accounts for 18% of global copper use and 14% for energy, unemployment climbed to a record in January. The International Monetary Fund said Feb. 28 that spending cuts will erode growth in the U.S., the world’s biggest economy.
“Commodity markets are worried about China and are sensing possible trouble in the macro picture,” said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. “Commodities may be out in front of a possible slowdown. The sentiment is changing to cautious.”
The Standard & Poor’s GSCI Spot gauge of 24 commodities is down 0.6% this year. The MSCI All-Country World Index of equities climbed 3.9%, while the dollar rose 3.2% against a basket of six trading partners. Treasuries lost 0.2%, a Bank of America Corp. index shows.
Money managers removed a record $4.23 billion from commodity funds in the week ended Feb. 27, including $4.03 billion from gold and precious-metals funds, said Cameron Brandt, the director of research for Cambridge, Massachusetts- based researcher EPFR Global, which tracks money flows. That’s the highest of data going back to 2000.
China’s official Purchasing Managers’ Index was 50.1 in February, down from 50.4 a month earlier and less than the forecast of 50.5 in a Bloomberg survey of 31 analysts. Readings above 50 indicate expansion. Steel reinforcement-bar futures fell 1.8% in Shanghai last month, the first drop since November, and iron-ore prices tumbled to a four-week low March 1. Almost half of China’s provinces have set lower targets for growth this year than in 2012, Nomura Holdings Inc. estimates.