Hedge funds cut bets in longest retreat since 2008

PUBLISHED : Tuesday, 20 November, 2012, 12:00am
UPDATED : Tuesday, 20 November, 2012, 3:51am

Hedge funds have cut bullish commodity bets for a sixth straight week, the longest slump since the depths of the global recession four years ago, on mounting concern that economies are slowing.

Money managers lowered combined net-long positions across 18 US futures and options by 17 per cent to 772,512 contracts in the week ended November 13, data from the Commodity Futures Trading Commission shows. Holdings have tumbled 38 per cent since October 2, marking the longest retreat since August 2008. Investors turned bearish on copper for the first time since August.

Commodities are headed for the first annual loss since 2008 as weaker growth and more supply will mean surpluses in sugar, aluminium and zinc, according to Morgan Stanley. US industrial production unexpectedly declined in October, while applications for jobless benefits rose to the highest level since April 2011, separate reports showed last week.

The 17-nation euro-area's economy tumbled back into recession in the third quarter for the second time in four years, official figures showed on November 15.

"I am not bullish on commodities," said Martin Murenbeeld, chief economist at Toronto-based DundeeWealth. "I don't think we are going to see improvement in the world economy for some time as there are too many problems."

The Standard & Poor's GSCI Spot Index of commodities dropped 1.2 per cent this year as the MSCI All-Country World Index of equities gained 6 per cent and the US dollar rose 1.3 per cent against a basket of six major currencies. Treasuries returned 2.8 per cent, a Bank of America index shows.

Money managers added a net US$681 million to commodity funds in the week ended November 14, with gold and precious metals accounting for US$732 million, according to Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR Global, which tracks money flows.