The losses in commodities were more spectacular, their biggest one day loss in 18 months as those fears about China and Ireland saw investors sell and head for cover.
Some commentators (such as The Economist magazine) continue to pour cold water on the idea that speculation is responsible for much of the momentum in commodity markets, but Friday’s sell-off would indicate there are at least quite a few punters at the margins and exposed to swings in sentiment and price.
The Reuters/Jefferies CRB index dropped 3.6%, its biggest daily loss in a year and a half, gold, copper and oil fell 3% or more, wheat dropped 5%, silver more than 6% and sugar 12%, which ended a near rout for that commodity since Wednesday.
Oil had earlier hit a 25 month high, with gold and oil both hitting all time highs in the previous session.
Oil had risen by nearly 8% in the previous fortnight and looked vulnerable, as was gold which again showed its true colours in times of rapid and volatile uncertainty (it slides as investors sell and buy US dollars in particular).
The US dollar had its best day and week for months, in fact the euro had its worst against the greenback for three months and has fallen around 5 USc in a week to $US1.3691 in New York on Saturday morning.
Nymex December crude fell $US2.80, or 3.2%, to $US85.01 a barrel in New York, while in London, ICE December Brent crude fell $US2.60 to $US86.21 a barrel.
Copper had its biggest fall in four months in New York and fell from a record in London on concern that China’s bid to rein in inflation will cool demand for industrial metals.
Comex March copper lost 13.15 USc, or 3.3%, to close at $US3.898 a pound in New York, the biggest loss.
The price fell 1.3% last week, the third decline in four weeks.
On the London Metal Exchange, three month copper metal fell $US215, or 2.4%, to $8,615 a tonne (or $US3.91 a pound).
On Thursday, the price touched a record $8,966. The previous peak of $8,940 was set in July 2008.
Also on the LME, aluminium, lead, zinc, nickel and tin dropped.
Gold suffered its biggest fall in four months on Friday, dropping 3% on those fears about China, Ireland and the stronger US dollar took their toll.
Spot gold slid 3.3% to $US1362.66 an ounce, having earlier hit a one-week low at $US1359.70 an ounce. It was the biggest one-day fall since July 1.
Comex December gold futures for December delivery fell $US37.80 an ounce at $US1365.50 an ounce.
Among other precious metals, spot silver plunged 6.5% to $US25.94 an ounce as speculators abandoned what had become the most popular precious metal play in the markets.
Platinum fell 4.5% to $US1673.24 an ounce and palladium slipped 5.2% to $US672.72.
It was spot silver’s biggest fall since February of this year and the second major fall of the week which started after Comex raised margins by 30% earlier in the week because it was concerned about the extent of leverage and speculation in the market. That always shakes out the desperate punters with not too much money.
Reuters commented, "In a week marked by disrupted correlations and extreme volatility, dealers said precious metals were caught up in near indiscriminate selling across the commodity spectrum rather than suffering from any bullion-specific bearishness". In other words, sell at any cost and damn the results.
Sugar has been another favourite of momentum investors because of its rollercoaster swings this year, up, down and then up to Wednesday when prices peaked above 33 USc a pound, the highest they have been since 1981.
On Friday refined-sugar prices plunged by a record amount in London, and raw-sugar futures in New York dropped the most in 22 years on Friday on those fears about China (which were largely unquantified, mind you).
In London March refined sugar futures fell $US91.50, or 12%, to close at $US677.10 a tonne, the biggest fall every according to Bloomberg and Reuters.
The price fell 2.8% on Thursday.
In New York, March raw sugar futures lost 3.45 USc or 12% to end at 26.21c on ICE. The single-day drop and this week’s slide of 17% since mid 1988.
Sugar had doubled since touching this year’s low in May, driven by the weaker US dollar and fears that crops were being damaged by adverse weather in Brazil, Russia, Thailand and Pakistan. Now fears about Indian crops and Australia added to the strength in the early part of last week.
And in Chicago, January soybean futures fell by the limit of 70 USc, or 5.2%, to close at $12.69 a bushel.
Earlier, the price reached $US13.485, the highest level for a most-active contract since August 2008, according to Bloomberg data.
Soybean prices are up 40% since June as it has become clear the size of the US crop will be lower than forecast.
US corn futures are also being impacted by the concerns about the size of US grain crops.
On Friday Chicago corn for March delivery dropped 30c, or 5.2% (limit down, like soybeans), to close at $US5.48 a bushel.
Up to Friday corn prices had risen 46% from midyear on the fears the US crop and carryover stocks will be lower than thought.
And wheat wasn’t immune, with the March contract in Chicago shedding 34.5 USc, or 4.6%, to end at $US7.095 a bushel.
Wheat prices were down 2.6% last week, while soybeans and corn were
