Bulls Rewarded With Best January Rally Since 2006

February 4, 2013

Hedge funds and other money managers raised net-long positions across 18 U.S. futures and options in the week ended Jan. 29 by 5.6 percent to 800,738 contracts, the highest since Dec. 11, U.S. Commodity Futures Trading Commission data show. Traders became the most bullish on cotton since October 2010 and increased wagers on silver gains. Crude-oil holdings rose a seventh week, the longest stretch, data starting in 2006 show.

The Standard & Poor’s GSCI Spot Index of 24 commodities advanced 4.5 percent in January as contracts outstanding jumped 6.2 percent, the most in a year. Chinese manufacturing expanded for a fourth month, and U.S. payrolls climbed, separate reports showed Feb. 1. The Federal Reserve will keep buying securities at the rate of $85 billion a month to help sustain the rebound, policy makers said Jan. 30, while speculation grew that a new Japanese central bank governor will boost stimulus.

"We’ve seen some better-than-expected indicators out of China lately, and in general the global economy seems to be a bit better than people had been forecasting coming into 2013," Peter Jankovskis, who helps manage about $3.2 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. "The Fed continues to be very supportive of the economy, and that’s good for commodities."

Longest Rally

The GSCI Spot Index rose 2.5 percent last week, an eighth consecutive gain and the longest rally since 1996. The MSCI All- Country World Index of equities climbed 0.7 percent, while the dollar slid 0.8 percent against a basket of six trading partners. Treasuries lost 0.1 percent, a Bank of America Corp. index shows.

A Chinese Purchasing Managers’ Index was 50.4 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. Readings above 50 indicate expansion. Earnings at Chinese industrial companies increased for a fourth straight month in December, the bureau said Jan. 27.

The U.S. added 157,000 jobs in January and there were more hirings in the previous two months than reported earlier, government figures showed. The jobless rate increased to 7.9 percent from 7.8 percent.

Stimulus Action

While the report showed the labor market "continues to heal," the gain in unemployment means the Fed will "remain engaged" in stimulus action, Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., said in a Bloomberg Television interview Feb. 1. Speculation that Japanese Prime Minister Shinzo Abe will pick a new central bank governor who will boost stimulus drove the yen to the lowest in 2 1/2 years.