The marks of the European crises

Oil prices hit an eight-month low on Monday and demand worries battered base metals and agricultural products, as investors dumped commodities on deepening fears of global recession.

Gold traded near a two-week low before recovering as investors rushed to safety, offsetting the firmer dollar.

A $700-billion bank bailout plan approved by U.S. lawmakers last week appeared to have done little to soothe markets as officials from around the globe scrambled to contain the fall-out from the deepest financial crisis since the 1930s."The rescue package from Friday is not rescuing any of the markets. The fears of a full blown recession are growing,"said analyst Eugen Weinberg at Commerzbank.

Signs of a global economic slowdown prompted investors to get rid of risky assets. This because the Reuters/Jefferies CRB index had its biggest-ever weekly drop by losing more than 10 percent. " Our expectations are that this year will represent the worst performance in commodity returns since 2001 and we expect this poor performance to continue most notably in the energy and industrial metals sectors, " said Deutsche Bank in a report.

A firmer U.S. currency dampened sentiment by making dollar-priced metals more expensive for other currency holders. "The dollar is strengthening and commodities while this was seen as a hedge against a weak dollar," Commerzbank's Weinberg said.

The euro was hammered against major currencies as the financial crisis spread throughout Europe without any sign of a coordinated policy response.
Oil slipped $3.99 a barrel to $89.89 by 1027 GMT after touching a session low of $89.07. This is its lowest since early February and it was its fourth day of loose.

"We are seeing a lot of forced selling. There is an ignorance of fundamentals that we have seen in the equity markets in general and it is extending to the raw materials " a London-based fund manager said, pointing to prices going below the marginal cost of production in platinum and some of the base metals.

Last Friday gold was traded at $834.80 an ounce, now its being traded at $848.60 an ounce. A sharp slide in equity markets boosted interest in gold as a haven from risk.

London Metal Exchange copper futures fell 7.2 percent to $5,575 a tonne, its weakest since February 2007, and more losses may be in store.

In other markets, Chicago soybean futures fell more than 3 percent to an eleven month low and coffee, sugar and cocoa futures fell sharply to their lowest evels in months. "There is liquidation across the board," said one soft commodities trader. "Commodities are down, and the dollar is up. A storm is going on in the financial markets."

ICE December Arabic’s were down 3.35 cents or 2.7 percent to $1.1870 a lb, ICE March raw sugar futures were down 0.4 cent or 3.2 percent to 12.21 cents and benchmark ICE December cocoa was down $73 or 3 percent at $2,396 per tonne at 1025 GMT.

European wheat traded at 155 euro a tonne, down from Friday's 159.75.