By Rachel Graham and Luzi Ann Javier Feb. 19 (Bloomberg) -- Commodities fell for the first time this week on heightened speculation about the end of stimulus after the Federal Reserve’s decision to raise the discount rate. The S&P Index of 24 commodities dropped 0.8 percent to 514.32 at 12:20 p.m. in London, led by declines in lead, aluminum and energy products. The dollar climbed to a nine-month high against the euro, sapping demand for raw materials. Crude oil fell 1.1 percent in New York, copper dropped 0.3 percent in London and wheat declined 1 percent in Chicago. Commodities demand has rebounded after the worst economic slump since World War II as governments spent trillions of dollars to revive growth. Prices fell last week after China, the world’s fastest-growing major economy, sought to cool growth. “Things are looking up for the dollar and commodities are suffering as a result,” said Joern Quitzau, a Hamburg-based economist at Berenberg Bank who is responsible for commodities. The Fed yesterday increased the rate it charges banks for overnight loans for the first time since June 2006, to 0.75 percent from 0.5 percent. The central bank portrayed the decision as a “normalization” of lending that would have no impact on monetary policy. “We’ve already seen China putting the brakes on and now the U.S. is doing the same,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. Commodities last year had the biggest jump since at least 1971 as the Fed took the most aggressive monetary policy easing steps in its 96-year history. The U.S. is the second-biggest copper buyer, after China, and is the biggest energy consumer. Crude Oil, Copper Crude oil for March delivery fell as much as $1.30, or 1.6 percent, to $77.76 a barrel in electronic trading on the New York Mercantile Exchange and last traded at $78.05. Copper for delivery in three months on the London Metal Exchange lost as much as $150, or 2.1 percent, to $7,115 a metric ton and was last at $7,200 a ton. Gold was little changed and sugar, cocoa and silver prices were higher. Raw material prices won’t “go down as dramatically as some are thinking” said Nestle SA Chief Executive Officer Paul Bulcke said at a press conference in Vevey, Switzerland today. He said he is “cautious” on the outlook for commodity prices. Gold for immediate delivery fell as much as 0.8 percent to $1,099.41 an ounce before trading little changed at $1,109.35. Gold is considered a safe-haven investment and is benefiting from that, Quitzau said. “Investors are still looking to diversify,” he said. Soybeans for May delivery fell 0.7 percent to $9.505 a bushel after Argentina said yesterday it may exceed a forecast for a record harvest of 52 million tons as rains aid crops. Wheat fell 6 cents to $4.935 a bushel. To contact the reporters on this story: Rachel Graham in London at rgraham13@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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