Commodities sold to cover losses

Crude oil fell to a six-week low and copper erased most of this year's gain as investors sold commodities to cover losses in equity markets and on concern that slower global growth will curb demand for raw materials.

Corn plunged the most in three months and soybeans fell by their daily limit. White sugar, nickel and platinum tumbled in London. More than half of the world's biggest equity indexes are in a bear market, wiping more than $5 trillion from stock markets this year.

"2008 will be rough", Roland Jansen, who helps run the $129 million Mother Earth Resources fund in Liechtenstein, said by telephone from Singapore. "The current crisis is impacting commodities heavily. It's huge. All those hedge funds, and other speculators, are getting out."

Commodity prices have rallied for six years, with an average annual return of 24 percent for the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities. That's about four times the yearly gains in the Standard & Poor's 500 Index and Europe's Dow Jones Stoxx 600 Index. The slide in equities over the past two days has prompted brokers to demand more cash or securities to pay for losses.

Crude oil for February delivery fell to as low as $86.11 a barrel, the lowest since Dec 6, on the New York Mercantile Exchange.

Copper for delivery in three months fell $50, or 1 percent, to $6,820 a metric ton on the London Metal Exchange after trading down to $6,675, the lowest since Dec 31. Nickel slid 3.1 percent to $26,850 a ton.

"Prices have come off but maybe we are not as weak as I would have expected," said Adam Rowley, a London-based analyst at Macquarie Bank Ltd.

Agencies

(China Daily 01/23/2008 page17)