Commodities in biggest drop since 2008

The 19-commodity Reuters-Jefferies CRB index, a global benchmark, finished the second quarter 6pc down.

It was its biggest decline since the fourth quarter of 2008, after the collapse of Lehman Brothers triggered a global financial market meltdown. The outlook for commodities through 2011 was uncertain, analysts said.

They said investors were anxious about whether the US Federal Reserve would prolong a stimulus programme that injected money into the commodity markets over the last nine months.

The Fed has said the USD 600bn bond-buying programme, known in market lingo as Quantitative Easing 2, or QE2, would not be extended beyond June 30.

"It's a bit like automakers who offer incentives to buy. People get hooked on them, and before one programme ends, they're thinking about when the next one will come along," said Gregory Whiteley, portfolio manager at DoubleLine Capital, a Los Angeles-based fund.

Stock and bonds outperformed commodities during the second quarter. The S and P 500 index for US stocks fell about half a percent, compared with the CRB. The Barclays Capital Aggregate index for US investment grade bonds did better, rising 2.4 pc.

Some said the price outlook for oil and agriculture was especially shaky as supply shocks from earlier in the year faded. The economic malaise, highlighted by unemployment in the United States, sovereign debt crises in the eurozone and China's curtailing of growth to fight inflation, only worsened fears. "We're seeing continued volatility in prices, and I think that reflects the fact that there are some patches of global growth that are very weak and that's likely to be a pervasive influence for some time," said Ben Westmore, commodity economist at National Australia Bank.

(c) Reuters

Authors: Commodities - Yahoo! News Search Results

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