Commodity investors fled for the exits on Thursday in a panic over raw materials demand, unconvinced that Federal Reserve action will stem a global economic slowdown that shows signs of infecting China and Germany.
Cyclical commodities took the hardest hit in the broad flight from risk, especially copper futures, which fell 7.9 percent, the biggest daily loss since the financial crisis in late 2008. U.S. crude lost 6 percent and silver, one of the most volatile markets, tumbled almost 10 percent.
They dragged the Reuters-Jefferies CRB futures index, a 19-commodity global benchmark for the asset class, down 4.4 percent, the biggest daily loss since May 5, to its lowest point since December 1.
The capitulation came a day after the Fed launched new stimulus measures aimed at reducing long-term interest rates without resorting to more money creation, known in previous plans as quantitative easing. It also issued a stark warning of significant downside risks to the economy.
Stock investors also voted with their feet, pushing the Dow Jones industrials down 4.5 percent, with little confidence that the plan would rescue a moribund U.S. economy.
The dollar rose to a seven-month high as mounting concerns about the global economy drove investors to seek safety and liquidity in U.S. Treasuries. A surging dollar makes commodities less affordable for buyers using other currencies.
I think the pain will continue until the monetary authorities announce some new liquidity measures. This is a bad situation, said a commodity hedge fund manager in New York.
Even gold, usually the investment of choice in uncertain times, lost 3.6 percent in U.S. futures trade, its reputation as a haven from insecurity shredded by two months of volatile trade and pressure from a resurgent dollar.
We can have bear market rallies, but I can't see in the background where the big good news is going to come from, said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Switzerland.
On Wednesday the Fed said it would sell $400 billion of short-term securities and buy the same amount of longer-term debt, but many had been hoping it would inject more liquidity, as in previous stimulus moves.
The bearish mood intensified after Chinese data showed its factory sector in the world's second-largest economy shrunk for a third consecutive month in September.
In Germany, business activity in September grew at its weakest pace in more than two years and new orders fell for a third month.
METALS LEAD DOWNTURN
Copper prices have strongly hinged on Chinese demand for metals to feed its construction and consumption boom. On the London Metal Exchange copper plunged more than 7.5 percent to a one-year low below $8,000 a tonne. It was copper's biggest one-day loss since the October 30, 2008, dragging the market into bear-market territory for the year.
LME nickel and tin also crashed and New York's COMEX December copper fell 27.55 cents to $3.4885 a lb.
While fewer Americans filed for unemployment benefits last week, the modest improvement was overshadowed. In Europe, the Flash Markit Euro zone Services Purchasing Managers' Index, which measures business activity at a cross section of businesses, sank to 49.1 this month from August's 51.5.
China is the commodity world's only remaining crutch, and a contraction reading is most unwelcome, said David Thurtell, a Citigroup Inc. analyst based in Singapore.
Brent crude futures fell 4.4 percent, their biggest one-day percentage loss in six weeks. U.S. crude oil futures lost more than 6 percent, closing below $81 per barrel.
NO SHELTER IN GOLD
New York's benchmark silver contract was the biggest loser with a $3.891 loss to settle at $36.578 an ounce, suffering doubly as an industrial metal and a precious metal.
Gold futures, traditionally a safe haven in times of market uncertainty, briefly tumbled nearly 5 percent. December gold settled $66.40 lower at $1,741.70 an ounce.
Looking at gold, you have periods when you have strength in the dollar and rising gold, when both are seen as safe-havens, but right now, you'd have thought that gold would be well supported given the European situation, the U.S. situation and a slowing China, said Societe Generale analyst David Wilson.
In Chicago, corn and wheat both fell around 5 percent.