NEW YORK (Reuters) - Oil and metals prices tumbled on Wednesday after Spain’s spiraling borrowing costs signaled a worsening European debt crisis, and soybeans and corn fell to near three-month lows as the Midwest harvest rapidly advanced.
Anti-austerity demonstrators clashed with police in Athens and Madrid, and the euro fell to a two-week against the dollar <USD/>, pushing investors to cut risk in markets from commodities to currencies and stocks. <MKTS/GLOB>
The bellwether 19-commodity Thomson Reuters-Jefferies CRB index .CRB lost more than 1 percent, dropping to a six-week low.
“It is ‘risk off’ today,” said Olivier Jakob, energy analyst at Petromatrix in Zug, Switzerland. “The Greek strike and Spanish demonstrations are getting a lot of coverage.”
Data showing an unexpectedly sharp decline last week in U.S. crude stockpiles - meaning more demand for oil than anticipated - did little to boost crude prices.
The front-month contract for U.S. crude fell more than 2 percent to below $89 a barrel, its lowest since August 3, after the U.S. Energy Information Administration reported a 2.45 million-barrel drop in crude inventories <EIA/S>.
London’s benchmark Brent crude slid about 1 percent to a one-week bottom below $109 a barrel.
Commerzbank oil analyst Carsten Fritsch said investors were losing faith in the ability of the European Central Bank to hold the euro zone together.
“No solution is in sight for the euro zone crisis,” Frankfurt-based Fritsch said. “It is impossible to make financial reforms in the face of such strong opposition from the people.”
Greek police fired teargas at youths hurling petrol bombs and stones as tens of thousands took to the streets in Greece’s biggest anti-austerity demonstration in months.
The Bank of Spain said the country’s gross domestic product fell at a “significant rate” in the third quarter, pressuring European equities to their worst session in two months.
Copper prices hit a two-week low, posting their largest single-session decline since August 2.
Copper, used in construction and the power sector, had gained about 16 percent from early August until hitting a 4-1/2 month peak last week on the back of stimulus measures from the European Central Bank and U.S. Federal Reserve.
The metal has eased 4 percent since touching that peak of $8,422 a tonne on the London Metal Exchange.
“After the central banks’ action prices ran ahead of the fundamentals, but there is a general recognition now that the rally was overdone and problems haven’t really gone away yet,” said Standard Chartered analyst Daniel Smith.
“There are some key concerns at this point: there are ongoing worries about the euro zone and about a softer tone in China,” Smith said, referring to the world’s largest copper buyer.
Three-month copper futures on the LME fell 1.9 percent to close at $8,120 per tonne, after rising 1.1 percent in the previous session. U.S. copper for December delivery finished down 1.3 percent at $3.71 a lb. <MET/L>
In grains markets, investors who had focused for more than three months on tight supplies brought on by the worst U.S. drought in half a century turned their attention to macro-economic factors, including a stronger dollar.
Key soybean futures on the Chicago Board of Trade fell below the key $16 a bushel level, touching their lowest since early August.
CBOT corn also hit a near three-month low, falling almost 3 percent to below $7.25 a bushel.
Editing by Jim Marshall