* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Oil drops to near 6-month low before rebounding on OPEC
* Iron ore futures fall sharply in China
* Safe-haven bonds, yen and gold all make ground
* Euro hovers at highest since Nov ahead of French elections
* Bond yields drift lower, focus on U.S. jobs data
By Marc Jones
LONDON, May 5 A slump in oil prices to the
lowest in almost six months rattled markets on Friday, prompting
a rally in safe-haven bonds, the yen and gold and taking the
shine off a record-breaking week for world stocks.
Bourses flinched in both Asia and Europe and Wall Street
also looked set for a subdued start as investors, who had been
expecting to spend the day mostly looking ahead to U.S. jobs
data and Sunday's French elections, were caught off guard.
Traders had had to duck for cover overnight as both Brent
and U.S. crude fell more than 3 percent amid
record trading volumes on mounting concerns about global
Things only fully stabilised when Saudi Arabia's OPEC chief
hit the wires in European hours, saying there was a growing
consensus among oil pumping countries that they needed to
continue to "rebalance" the market.
Brent clawed back to $46.86 a barrel almost two dollars
better off than its overnight low, but the scars left it an
eye-watering 6 percent lower than at the start of the week.
"The whole commodity complex has been affected by this and
it could have some pretty big implications if it continues for
much longer," said Saxo bank's head of FX strategy John Hardy.
"If you look at global risk appetite, equities have been
pretty quiet and that feeds into FX as well if carries on and
there is a risk switch."
Big commodity price drops do not just have have an immediate
impact on financial markets either.
As was seen during a slump between 2014 and 2016, they cause
major headaches for countries that rely on their revenues. They
also unleash deflationary forces, but can help energy-importing
economies, firms and households by lowering their energy bills.
Oil has not been the only commodity that has suffered this
week. Chinese iron ore futures fell almost 7 percent
in Shanghai overnight after tumbling 8 percent on Thursday.
Mining giant Rio Tinto hit a six-month low, Glencore
was set for its worst weekly loss in two months and
copper miner Antofagasta since December.
The Canadian dollar, the Australian dollar and
Russia's rouble - some of the world's most commodity-
sensitive currencies - were all sent spinning, falling
respectively to 14-month, four-month and seven-week lows.
They all fought back, though, after the Saudi OPEC
governor's comments to Reuters that: "A six-month extension (to
production cuts) may be needed to rebalance the market, but the
length of the extension is not firm yet."
Rio Tinto hit a six-month low on Friday, and
Glencore was set for its worst weekly losses in two
months, while for copper miner Antofagasta since
LE PEN TO THE SWORD?
In calmer waters, the euro touched a six-month high
of almost $1.10 ahead of France's weekend election, in which
polls now expect centrist Emmanuel Macron to convincingly beat
right-wing and anti-euro rival Marine Le Pen.
The gap between French and German 10-year government
borrowing costs also hit a six-month low and despite the dip on
the day, European shares were heading for a healthy 1.2
percent rise for the week. World shares hit a
record high on Wednesday.
"I think now this election is no longer an issue and the
market is already starting to focus on new issues: inflation,
the (euro zone) economy, and the U.S. data," said DZ Bank
strategist Daniel Lenz.
He was referring to U.S. non-farm payroll numbers due out at
1230 GMT (8:30 a.m. EDT) are expected to show 185,000 jobs were
created in April following March's underwhelming 98,000 figure.
The dollar and U.S. government bond yields
had both been nudged lower by the commodity market
worries. It is set to be the fourth weekly fall on the trot for
the greenback which is now at its lowest since November.
The yen and gold rose in tandem as investors
took refuge in safe havens, though the latter remained on track
for its biggest weekly decline in nearly six months on bets that
U.S. interest rates will rise again in the coming months.
"I think the payrolls will be under consensus," said fund
manager Hermes chief economist Neil Williams.
"It fits with my view that the U.S. is going to peak out at
a far lower interest rate than markets expect. The Fed's dot
plots says 3 percent, but I'm going closer to 1.5 percent."
Emerging markets were also caught in the commodities
sell-off. The main emerging currencies were all on track for
weekly losses and MSCI's closely-followed EM stocks index
hit a 10-day low.
China markets have also been wobbling in recent weeks but
the commodity market woes have been the central focus.
Brent traded volumes on Thursday reached an all-time high of
nearly 542,000 contracts, suggesting that big betting hedge
funds may have been ripping out long positions.
"It is now-or-never for oil bulls," said U.S. commodity
analysis firm The Schork Report. "They either put up a defence
here or risk further emboldening the bears for a run at the $40
threshold (for WTI)."
(Addition Reporting by Abhinav Ramnarayan, Veronica Brown and
Helen Reid in London; Editing by Hugh Lawson and Ed Osmond)