A record-setting rout in commodity prices overnight showed signs of fizzling out on Friday, led by a small pullback in silver, while Asian equities consolidated near the day's lows as market players squared positions before U.S. payrolls data.
Both spot silver and gold rose in Asia. Crude futures also gained, but then swung lower as European markets opened up.
This week's steady drip of selling turned into a deluge on Thursday. Spot silver and Brent crude were battered by record single-day falls, with the latter plummeting more than $12 to $109 at one point. The broader Reuters-Jefferies CRB index <.CRB>, a global commodity benchmark, dropped nearly 5 percent.
In Asia on Friday, the dramatic plunges caused a brief wave of stop-loss selling in stocks and commodity currencies such as the Australian dollar, which pushed higher some funding currency favorites like the yen and the dollar.
While some scattered buying pushed prices mildly higher in Asian time, trading remained volatile and sentiment cautious as this week's sharp drops in metals weighed on the broader market.
Even as the Reuters-Jefferies CRB index <.CRB> looked set to lose at least 8 percent on the week, for its biggest weekly fall since July 2008, Tetsu Emori, a commodities fund manager at Astmax Co in Tokyo, said prices may fall some more.
Commodity markets are poised for a further near-term drop as speculators and those who joined the rally in its late stages unwind long positions, Emori said. It was the best performing asset class in 2011 until last week, posting gains of more than 10 percent.
Energy and resource counters, which had been the outperformers in Asian equities before the selling spree in commodities erupted, led declines in regional stock markets.
Australia's shares <.AXJO>, which fell nearly half a percent, climbed back to be 0.2 percent off, thanks to a strong banking sector while shares outside Japan held early losses and were down 0.4 percent.
For the week, that index was is set to drop more than 3 percent. The Hang Seng index <.HSI> was off 0.4 percent.
Japanese shares <.N225>, opening after a three-day break, fell 1.5 percent on concerns that the yen's sudden surge due to unwinding of carry trades and a patch of U.S. soft data this week would slow the pace of the broader economic recovery.
COMEX silver slumped 5 percent in early trades before pulling back somewhat, but was heading for a weekly loss of nearly 30 percent as investors such as billionaire Carlos Slim increased bearish bets against the metal's dizzying rise this year.
Spot silver prices rose around 1 percent and gold was up just under 1 percent, to pare back some of the heavy losses from Thursday.
U.S. crude oil steadied after seeing its second-largest single-day loss on Thursday due to a washout of overstretched long positions arising from unrest in North Africa and the Middle East, traders said.
However, crude futures gave up their gains as European markets kicked into action to slip lower.
Brent crude rose as much as 1.7 percent before swinging 0.3 percent lower to $110.42. U.S. crude, which rose more than 1 percent earlier, was off 0.4 percent at $99.39.
When commodities reverse, it rarely goes down in a straight line, said Gordon Kwan, head of energy research at Mirae Asset Securities in Hong Kong. Brent has fallen below the 50-day moving average and I expect it to be testing $105 a barrel, Kwan said.
The greenback, a funding-currency favorite thanks to the Fed's ultra easy monetary policy, scored its biggest one-day rise in nearly nine months versus the euro on Thursday after the European Central Bank signaled it won't raise interest rates in June.
It is expected to hold on to its early gains before U.S. job data later in the day.
As some players had built up long positions in the Aussie and the euro, based on the rise in commodities, further falls in commodities could mean more position unwinding in currency markets, said Makoto Noji, currency analyst at SMBC Nikko Securities.
The sharp wave of risk reduction across markets also boosted bond prices with 10-year U.S. Treasury yields dipping to 3.16 percent before rising by two basis points. It has fallen more than 40 basis points in less than a month.