US Jobs Data Batter Commodities Amid Demand Worries

NEW YORK--Commodities tumbled Friday after dismal economic news spurred fears that global growth is slowing and eroding demand for raw materials.

Brent crude, the European oil benchmark, plunged below $100 a barrel to its lowest level in almost 17 months, while U.S. crude neared $83, in the wake of weak manufacturing data from Asia and Europe and disappointing U.S. jobs data. Copper hit its lowest level in five months while cotton broke through a 28-month low.

"Their prices are getting bushwhacked because everybody's afraid that these economies are going to slow down and the demand for all these commodities is going to be diminished substantially," said Mark Waggoner, president of Excel Futures, a commodities brokerage in Bend, Ore.

With prices of industrial and agricultural commodities in free fall, investors flocked to gold, with the August contract settling $57.90, or 3.7%, higher at $1,622.10 a troy ounce, its highest level in nearly three weeks.

Prices for most commodities have slid in recent weeks on fears that a deepening of the euro-zone debt crisis could squelch demand from that region.

But the combination of weak manufacturing indicators and disappointing jobs data in the U.S. are the latest signs that slowing growth isn't isolated to Europe. The U.S. added a paltry 69,000 jobs last month, well short of expectations, the Labor Department said.

The monthly jobs report is particularly relevant to commodities traders because it corresponds with appetite for raw materials. Fewer jobs added, for example, means fewer drivers fueling their vehicles on their way to work or vacation.

"This is one of the most critical measures in terms of economic activity and how it translates to energy demand, and gasoline demand in particular," said John Kilduff, founding partner at Again Capital in New York.

Sluggish jobs growth is also tied to consumer spending on goods like clothes. July cotton futures fell 4.1%, to 68.59 cents a pound, the lowest settlement since Feb. 5, 2010.

Brent crude for July delivery settled $3.44, or 3.4%, lower at $98.43 a barrel, its lowest finish since January 2011. Benchmark crude on the New York Mercantile Exchange settled $3.30, or 3.8%, lower at $83.23 a barrel, its lowest since October.

Front-month gasoline futures finished 2.4% lower at $2.6568 a gallon. Gasoline futures have been sliding along with oil prices the last two months, and the drop should help consumers at the pump. A gallon of regular gasoline averaged $3.611, according to AAA's Daily Fuel Gauge Report, down 19 cents from a month ago.

Gold's rally bucked a trend in force since September of the precious metal moving in line with risky assets like stocks and other commodities.

"We're seeing gold trading once again as more of a safety instrument than anything else," said Matt Zeman, head of trading at Kingsview Financial.

Gold also got a boost from expectations that additional stimulus by the Federal Reserve could be on the way. Gold prices often rally on such stimulus as a hedge against inflation that might be touched off by the government action.

"People feel that after this number, more money-printing is coming," Zeman said.

July copper settled down 5.35 cents, or 1.6%, at $3.312 a pound, its lowest settlement in five months.

Arabica coffee settled down 2% at $2.1570 a pound, its first finish under $1.60 since July 2010.

Copyright (c) 2012 Dow Jones & Company, Inc.

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