By Barani Krishnan
Fri Jun 8, 2012 7:35pm EDT
(Reuters) – Hedge funds and other money managers pulled nearly $1.7 billion from commodity markets in the first week of June, extending the bearish mood from May, as the euro zone crisis and stuttering global economy roiled markets, trade data showed on Friday.
Together with last month, speculators have cashed nearly $30 billion from the major energy, metals and agricultural markets, and wiped out almost half of the value in all U.S. commodity futures since the end of March, data from the Commodity Futures Trading Commission showed.
“If you take that data and couple it with the broad sell-off we’ve seen over the last two months in commodities, it clearly shows the largest funds and institutions are not just whittling positions but dumping them,” said Adam Sarhan at Sarhan Financial in New York.
According to the CFTC’s Commitment of Traders Report, the net length across 24 U.S. commodities futures markets fell by $1.68 billion to stand at $56.4 billion in the week to June 5 despite a rise in longs for crude oil, gold and silver.
At the end of April, overall net length stood at $84.6 billion, while at the close of March, it was at $105.5 billion.
The 19-commodity CRB index .CRB, a global benchmark for the asset class, fell to its lowest since September last week as investors’ preoccupation with the euro zone continued to take precedence over other fundamentals in commodities.
Analysts said they expected little relief in the week ahead, unless European authorities could firm up a rescue plan for Spain’s beleaguered banking sector.
Spain, whose credit rating was downgraded three notches on Thursday, was set to request European aid for its banks this weekend to forestall worsening market turmoil, EU and German sources said.
“There is a tremendous amount of fear going into the weekend as to what’s going to happen with the bailout on Spanish banks,” said Jeffrey Sica, chief investment officer at SICA Wealth Management LLC, which has $1 billion under management.
Concerns about slowing growth in China — the world’s largest commodities consumer — compounded the difficulty in determining how markets would go in the near-term.
A price spike in commodities following China’s surprise rate cut on Thursday proved fleeting, with investors now fearing that Beijing may be trying to preempt the impact of potentially grim economic indicators due this weekend, when it will release inflation, industrial output and trade data.
“The Chinese decision was a bit surprising. Cutting rates did signal that they are preempting something that either they know about or just a risk that’s clearly ahead of us,” said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
(Reporting by Barani Krishnan; Editing by Bob Burgdorfer)