NEW YORK (Reuters) - Commodity markets tumbled on Monday, as investors worried about the demand outlook for oil, metals and grains after weeks of rising prices built on optimism over economic stimulus in the United States and Europe.
With technical charts showing many commodity markets in or near overbought territory, weak regional U.S. manufacturing data gave commodity traders another reason to sell markets that had hit multi-month highs. Investors worried that high prices may hurt demand for commodities even as the Federal Reserve and European Central Bank take steps to reboot economic growth.
Oil and copper prices sank between 2 and 3 percent each, and soybean futures slumped about 4 percent.
The 19-commodity Thomson Reuters-Jefferies CRB index .CRB fell 2 percent, posting its biggest one-day loss in 2-1/2 months.
"The speed and severity of the sell-off in such a short time across commodity markets illustrates how correlated and fragile markets can be," said Adam Sarhan at New York's Sarhan Capital.
Until last week, the CRB had logged seven straight weekly gains, as investors banked on the Fed's third round of quantitative easing to push commodity prices higher.
The Fed said last Thursday it will buy $40 billion worth of mortgage debt a month until the U.S. jobs market improves, fueling a run-up in risky assets whose prices had languished for months on a dim global economic outlook.
Even so, some analysts had doubts about whether the rally would last, as past evidence has shown it takes months, or as much as a year, for substantive gains to build after a Fed easing.
Crude oil prices fell their most in a day since July, with London's benchmark Brent crude crashing through technical support to touch a 5-week bottom below $112 per barrel after closing down 2 percent officially at $113.79.
U.S. crude settled down 2.4 percent at $96.62.
Trading volumes in crude, initially muted due to a Jewish holiday, spiked as the market headed down. Ten thousand lots of Brent traded in one minute during the drop, up from 152 lots the minute before the market's turn.
Brent crashed through the 200-day moving average before beginning to recover, prompting some oil traders to seek an explanation for the abrupt fall.
"I've been doing this for 14 years and that's the fastest move I've ever seen," said John Gretzinger, energy risk manager at INTL-FCStone in Kansas City.
"I think it was too fast to be anything but HFT (high-frequency trading) or other algos," he said, referring to trading based on algorithms. "We just don't know right now, but that's my gut feeling."
Some pinned the selling on data showing weak factory activity in New York state, which had a second straight month of declines in September to a near 3-1/2 year low, according to a report from the Federal Reserve Bank of New York.
Investors also questioned whether stimulus by the European Central Bank be enough to end the euro zone debt crisis.
U.S. copper futures extended losses in after-hours trade, showing the biggest slump in a day since August.
The most-active copper contract for December delivery fell to a session bottom of $3.7270 after settling down 1 percent at $3.7920.
Three-month copper on the London Metal Exchange closed down 1 percent at $8,302 per metric ton (1.1023 tons).
U.S. soybean futures tumbled by the daily trading limit, posting their biggest percentage drop in 1-1/2 years, on selling sparked by anecdotal accounts of better-than-expected yields in the drought-ravaged Midwest farm belt.
"There have been reports of yields being better than expected during the harvest over the weekend, and farmers were also selling more corn than expected because they don't want to store grain that is affected by diseases," said Charlie Sernatinger, vice-president of sales at ABN AMRO.
Jeff Hainline, president of Advance Trading, added: "It's nothing scientific, but these are people we trust."
Chicago-traded soybeans for November delivery slid 4 percent to $16.69 a bushel and registered the lowest front-month price since August 20.
Corn futures also fell 4 percent while wheat tumbled 5 percent.
Editing by David Gregorio