Markets: Commodities Sold Off/Shares Steadied

Led by gold and copper, commodity prices fell to nine month lows last week, thanks to the sell-off on Thursday and Friday across the globe.

As dramatic as the damage to equities, the real losers were commodities, especially the likes of gold, copper, silver and other metals.

With New York oil prices tossed in, all suffered double digit losses in value for the week, particularly from Wednesday afternoon in the US, and especially on Friday.

According to some analysts the fall in commodity prices was due to investors losing faith in the strength of the global economy, especially China.

And while that might have accounted for much of the initial panic, Friday saw speculators liquidating their commodity positions to raise cash.

Sharemarkets in Europe and the US actually steadied Friday night, our time, after another nervous day in Asia earlier on Friday.

So the slump in some commodities prices on Friday night took markets, investors and many analysts by surprise.

But it has to be pointed out the breather in equities on Friday is just that, nothing more significant.

Gold crashed more than $US100 on Friday as the metal that is supposed to be a bulwark in troubled times, went into free fall.

Silver joined its bigger brother and plunged as well, suffering its second steep loss in value since early August.

Gold had its deepest two-day plunge since 1983 and must have hurt some trading books.

Silver fared just as badly with futures posting their worst day since 1987, losing 14%, That must have hurt a lot of investors.

Copper was also sold off heavily and while oil fell, it didn't suffer the same deep drop as gold, silver and copper.

Talk of a major hedge fund liquidating its gold holdings was one rumour reported as driving gold lower.

But it was more than just one fund: the loss in value of the prime speculative commodities was driven by investors (hedge funds and more stable investors) being forced to raise funds or taking profits and quitting their riskiest investments and heading for the safety of cash or bonds.

It was noticeable that gold, copper and silver in particular fell heavily, despite equities stabilising on Friday in most regions, especially Europe and the US as the mindless sell-off of Thursday dissipated.

The Dow ended up 37.65 points, or 0.35%, at 10,771.48 on Friday, the Standard & Poor's 500 Index was up 6.87 points, or 0.61% at 1,136.43. The Nasdaq Composite Index was up 27.56 points, or 1.1%, at 2,483.23.

And global stockmarkets as measured by the MSCI All-Country index were up 0.2%, after hitting their lowest level since July 2010 at 274.20.

That made the sharp, 1.6% fall in Australia on Friday, look rather foolish, again.

Bloomberg estimated that more than $US3.4 trillion has been wiped from share market values last week.

The Standard & Poor's GSCI Index of 24 commodities fell to a nine-month low by the close on Friday.

The index has fallen 21% since touching a 32-month high in April and lost more than 8% last week alone.

Gold has dropped 15% since reaching a record $US1,923.70 an ounce on September 6.

Spot metal fell 5% on Friday night (our time) to $US1,643 an ounce, after trading between a session peak of $US1,754.71 and low of $US1,628.69.

The intra day move of $US126 an ounce was the biggest on record in dollar terms, according to Bloomberg.

Over the week, spot gold fell 9%, its biggest weekly drop since 1980.

Comex December gold lost 6% on Friday, or more than $US101, at $US1,639.80 an ounce.

That was after the 3.7% fall on Thursday.

Gold futures shed 10.1% in value last week which was also the biggest fall in 28 years.

Spot silver was down 14% on Friday, a seven-month low below $US31 an ounce.

That took the fall for the week to more than 25%.

Comex December silver futures closed down nearly $US6.50 at around $US30.10 an ounce, a fall of almost 18% on the day.

Comex December copper futures for December delivery declined 20.85c, or 6%, to $US3.28 a pound

That took the two-day fall to a large 13%, the most since October 2008 when the GFC deepened suddenly.

Nickel and tin also fell sharply.

LME three month copper fell 7% on Friday to around $US7,115.75 a tonne, the lowest price since August 2010, before rebounding to end at $US7,260 a tonne. That was a fall of $US545 a tonne on the day.

LME copper metal lost 16.7% last week.

Copper has lost 28% since its all time high of more than $US 10,000 a tonne in February.

Tin plunged by around 14% to $US17,000 a tonne and nickel by around 11% to $US16,800 a tonne, but aluminium 'only' lost 6%.

Nymex WTI crude oil dropped 66c to $US79.85 a barrel, the first settlement below $US80 since August 9.

Nymex futures lost 9.2% in value last week which was most of the 13% fall in value so far this year.

Brent crude in London lost 6% for the week and closed just under $US104 a barrel.

Crude oil and corn had their biggest weekly drops since May.

Coffee prices have tumbled 20% this month, and cocoa is down to a one-year low.

Sugar also fell again in New York and London.

New York raw sugar futures fell 2.7% to 24.13 USc on Friday.

That took the loss for 8.3% for the week and 19% for the month so far.

Markets in Asia will open warily today after the sell-off slowed and then finished in European and US markets, Friday night, our time.

According to Bloomberg, stockmarkets lost around $US3.5 trillion in value last week ($A71 billion in Australia).

But most of that happened on Wednesday afternoon in the US and across the globe on Thursday and part of Friday in Asia.

The MSCI All-Country World Index fell into a bear market (a fall of 20% or more) and will go further if the Europeans don't quickly convince the world that it can handle the eurozone's problems.

According to media reports in the UK, US and Europe yesterday and overnight, Europe's governments are speeding the setup of a permanent rescue fund.

The deal could see a major boost to the Stability Fund (see first story) and other measures.

And the European Central Bank may step up efforts to ease financial-market tensions, including offering banks 12-month loans.

That could become apparent in the next week or so.

Certainly some analysts see the stupid 0.5% of rate rises from the ECB this year being reversed at the October or November meetings of the central bank.

In the US on Friday, the Dow rose 37.65 points or 0.35% to end the week on 10,771.48 points.

More important was the weekly loss of 6.4% - the Dow's worst weekly performance in both point and percentage terms since the week ending October 10, 2008, at the depths of the GFC.

The Standard & Poor's 500 index added 6.87 points or 0.61% on Friday, but lost 6.5% from last Friday's close.

The Nasdaq Composite Index climbed 27.56 points, or 1.1%, to 2,483.23, leaving it off 5.3% over the week.

Last week's violent fall, which came on Wednesday afternoon and Thursday in northern markets eroded most, if not all the previous week's share gains, making that week more like the 'sucker's rally' than it seemed last Monday.

A week earlier, the Dow finished up 4.7% for the week, the S&P 500 jumped 5.4% and the Nasdaq Composite Index ended up 6.3%.

So last week's losses for both the Dow and the S&P accounted for those gains and a bit more.

But the Nasdaq ended last week still above the previous week's close, so the weakness wasn't uniform or as dramatic that some of the raw numbers suggested.

In Australia, the local market will open lower today, judging by the performance of the share price index futures overnight Friday.

The SPI was down 14 points to 3916. That was after physical market lost 1.6% on Friday and 5.9% over the week.

(Note that the Australian market lost heavily, but not quite as much as the US markets or Hong Kong.)

The Australian dollar edged higher overnight Friday and ended at 97.79 USc, down from the $US 1.0361 close the previous Friday.

The close in New York was down on the 98.39 USc close in Sydney on Friday.

The ASX/200 Index is more than 22% lower than the mid-April high of the year, placing it firmly in bear-market territory.

On Friday BHP Billiton was down $1.08, or 3%, at $34.55 while Rio Tinto lost $2.45, or 3.8%, at $62.65. Fortescue slumped 51c, or 9.3%, to $4.95.

The Commonwealth Bank was the only big bank to gain ground, up 40c at $43.33.

Westpac was 19c weaker at $18.73, ANZ ended down 23c at $18.75 and National Australia Bank was down 51c, or 2.3%, at $21.01.

The best performer last week among big companies was BlueScope Steel whose shares rose more than 6%, as the Australian dollar fell Thursday and Friday.

European markets steadied Friday and had solid 2% plus gains on the day.

But for the week the Stoxx Europe 600 Index dropped 6.1% and is now down 26% since its peak in February.

Bloomberg reported that all 18 major markets in western Europe fell last week, with the DAX Index in Germany falling 6.8%, France's CAC 40 losing 7.3% and London's FTSE 100 5.6%.

In European bond markets, yields on Italian and Spanish 10-year debt fell, while rates on UK, French and German debt increased. Greece's two-year yield surged 3.17% to a ridiculous 69.69%.

Emerging markets had a tough week with the MSCI Emerging Markets Index losing 2.2% on Friday to take the week's fall to a steep 12%.

In Asia, the MSCI Asia Index excluding Japan fell 10.3% last week.

Japanese markets were closed last Tuesday and Friday for public holidays.

The MSCI Asia Pacific Index, which is heavily weighted to Japanese stocks, dropped 7.1% last week, taking its losses from a May 2 high to more than 20%.

South Korea's Kospi Index tumbled 7.8%, Hong Kong's Hang Seng Index lost 9.2% and the Nikkei lost 3.4% in the holiday-shortened trading week.

Singapore's Straits Times Index retreated 3.2% and Indonesia's Jakarta Composite Index plunged 11% which was the worst performance of any benchmark index in Asia.

Economic data from Japan and China will test Asian market sentiment on Thursday and Friday.