Commodities Head for Biggest Weekly Decline in Over 50 Years

By Glenys Sim

Oct. 3 (Bloomberg) -- Copper, corn and silver drove commodities toward their biggest weekly decline in more than 50 years on concern that the worst financial crisis since the Great Depression will push the U.S. into recession.

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. Manufacturing declined to a 7-year low in the U.S. and contracted at the fastest pace in 16 years in the U.K. last month. Initial jobless claims rose to the highest since 2001, the U.S. Labor Department said yesterday.

``The string of poor U.S. and EU economic data and fears of a weakening Chinese housing market gave further tangible support to increased bearish sentiment as markets seem to be pricing in a much slower growth forecast for the global economy,'' Hussein Allidina, commodity research analyst at Morgan Stanley said in an e-mail today.

The UBS Bloomberg CMCI Index of 26 raw materials is having its worst week since at least 1997 amid skepticism that a U.S. government $700 billion bank bailout plan won't be enough to stimulate economic growth and demand for commodities. BHP Billiton Ltd., the world's biggest mining company, fell as much as 5.6 percent to the lowest in 18 months today.

Copper is heading for its biggest weekly loss in over two decades, after reaching a record high earlier this year and silver plunged 18 percent this week, the most since 1983.

Jobs Eliminated

U.S. employers probably eliminated 105,000 jobs last month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington. The unemployment rate held at a five-year high of 6.1 percent, according to a separate survey.

A ``very weak'' non-farm payrolls number could see commodities ``remain under pressure,'' Walter de Wet, Standard Bank Group Ltd. analyst in Johannesburg, said in an e-mail late yesterday.

Commodities also fell as the euro headed for its largest ever weekly decline against the U.S. currency amid signs that Europe's economy is slowing.

``The rapid deterioration in the U.S. and then European financial markets brought panic into the broader markets and also drove the U.S. dollar higher, both negative for the commodity space,'' said Allidina.

Crude oil dropped for a third day, heading for its biggest weekly decline since 2004, on concerns a global economic slowdown will crimp fuel demand.

U.S. lawmakers who helped defeat the financial-market rescue package this week are reconsidering their votes amid signs the crisis on Wall Street is spreading. The legislation to be voted on by the House of Representatives later today allows the government to buy troubled assets from financial institutions rocked by record home foreclosures.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net