Commodities fall on worries about Greek debt

AP News
Posted: Jun 15, 2011 4:02 PM
Commodities fall on worries about Greek debt

Commodities plummeted Wednesday after Greece's debt crisis grew worse and New York area manufacturing weakened.

The news undermined confidence that demand for basic materials will continue to grow at a fast pace. Oil and other energy products plunged at least 4.5 percent while grains fell as much as 4 percent. Most metals also dropped, although gold settled up slightly.

Thousands of people protested in Athens against cutbacks required to avoid a default on the government's debt. If Greece defaults on its loans, it could affect the economies of other European countries.

Moody's said it may downgrade its ratings of France's three largest banks because of their exposure to Greek debt. Earlier this week Standard & Poor's cut Greece's creditworthiness to the bottom of the 131 countries that have ratings.

The New York Federal Reserve's survey of manufacturers in the New York region fell to -7.8 in June from 12 the previous month. A reading below zero indicates that the sector is shrinking. It marked the first time the index had fallen below zero since November.

The National Association of Home Builders said its builders' sentiment index fell in June to the lowest level in nine months.

Investors also are watching closely as the Federal Reserve ends a $600 billion bond-buying program at the end of June. The program, called quantitative easing, was intended to keep interest rates low and encourage economic growth.

"The trend overall is just weakening data and with (quantitative easing) coming to an end at the end of the month, it's got a lot of people very, very concerned," Kingsview Financial analyst Matt Zeman said. "The question still remains, can this economy continue to recover without stimulus?"

Most commodities also were pushed lower as the dollar grew stronger. Commodities are priced in dollars so a stronger dollar makes them more expensive for buyers who use other currencies.

In contracts for July delivery, wheat fell 22.75 cents, or 3.1 percent, to settle at $7.085 a bushel, corn dropped 29.75 cents, or 3.9 percent, at $7.2575 a bushel and soybeans were unchanged at $13.68 a bushel.

Benchmark oil for July delivery fell $4.56, or 4.6 percent, to settle at $94.81 per barrel on the New York Mercantile Exchange.

In other Nymex contracts, heating oil dropped 14.1 cents, or 4.5 percent, to settle at $2.9848 per gallon, gasoline fell 14.11 cents, or 4.6 percent, to $2.9235 per gallon and natural gas dropped 0.4 cent to $4.577 per 1,000 cubic feet.

August gold settled up $1.80 at $1,526.20 an ounce. July silver fell 0.1 cent to settle at $35.41 an ounce.

In other metals contracts, July copper dropped 3.3 cents to settle at $4.122 a pound, July platinum dropped $20.70 to $1,774.20 and September palladium fell $16.75 to $776 an ounce.