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 The commodities crunch was compounded as the dollar <.DXY> began
to flex its muscles again after a quiet couple of days, gold <XAU=>
slipped back toward a 5-year low and as a major sea freight index
<.BADI> hit its lowest level on record.
Global stock markets seemed largely oblivious, however. European
shares were barely budged <.FTEU3> as the main London <.FTSE>,
Frankfurt <.GDAXI> and Paris <.FCHI> markets headed for 2-3.5
percent weekly gains and Tokyo's Nikkei <.N225> ended Asia's week
near a three-month high. [.T]
The euro was sent tumbling back below $1.07 to $1.0670 as Mario
Draghi gave the clearest hint yet that the ECB will expand its
already 1 trillion euro stimulus program next month and cut its key
deposit rate even deeper into negative territory.
"If we decide that the current trajectory of our policy is not
sufficient... we will do what we must to raise inflation as quickly
as possible," Draghi said at a conference in Frankfurt, adding that
a decision will be made at the ECB's Dec. 3 meeting.
 One of the most striking things is that the move will come just over
a week before the ECB's U.S. counterpart, the Federal Reserve, is
likely to deliver the first hike in U.S. interest rates rise in
almost a decade.
The expected divergence pushed the dollar <.DXY> back up toward a
7-month high against a basket of top currencies in early European
trading. Goldman Sachs on Thursday made a stronger greenback its top
trade tip for 2016.
The prospect of higher Fed rates and dollar, alongside concerns
about China's economic health continue to create uncertainty.
For example, copper <CMCU3> - seen as a good gauge of the global
economy because of its wide industrial use - has been hit by
persistent worries that supply cuts won't be enough to offset the
pressure on prices caused by weak demand in top user China.
It slumped to a 6-1/2-year low of $4,573.50 per tonne before
bouncing back to $4,650.00, still down 3.8 percent so far this week.
The Baltic Index <.BADI>, which tracks rates for ships carrying dry
bulk commodities and is viewed as a good reflection of the health of
world trade, fell to a record low, having fallen 58.8 percent from
its peak this year.
"Many economies in Asia and emerging markets are still not doing
that good. Demand for raw materials remain very weak," said Masahiro
Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in
Tokyo. OIL PREDICTIONS
Oil prices were also not far from near three-month lows hit earlier
this week.
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Global benchmark Brent futures <LCOc1> last stood at $44.40 per
barrel, compared to Monday's low of $43.15 as U.S. crude sat just
above $40 a barrel. [O/R]
Crude futures have already lost around 60 percent of their value
since mid-2014 as supply exceeds demand by roughly 0.7 million to
2.5 million barrels per day to create a glut that analysts say will
last well into 2016.
Market data also suggests oil traders are preparing for another drop
in prices by March, as what is expected to be an unusually warm U.S.
winter dents demand just as Iran's exports hit global markets after
its sanctions are ended.
"Uncertainty is so high in the world's crude markets," said Kang
Yoo-jin, commodities analyst at NH Investment and Securities based
in Seoul. "Prices will have high volatility in 2016 and particularly
in the first half."
In debt markets 2-year U.S. yields were up for their fourth week in
the last five.
Greek bond yields meanwhile headed back toward their lowest levels
in more than a year after Greece's parliament approved a reform bill
late on Thursday to secure further bailout funds from its
international lenders.
Mario Draghi's soothing sounds also underpinned the broader euro
zone bond market as core German Bunds <DE10YT=TWEB>, but also
French, Italian and Spain bonds, cruised toward their second
straight week of yield falls. [GVD/EUR]
Neil Williams, chief economist of fund manager Hermes in London,
said that one of the things helping equity markets was the
increasing degree of clarity on what the Fed and ECB will do next
month and on China's support plans for its economy.
"China obviously needs watching. When a $10-1/2 trillion economy
which accounts for about a half of the world's commodity demand
slows we need to take notice," Williams said. "But I'm increasingly
reassured that they have the policy buttons to press and are
pressing them."
(Editing by Toby Chopra)
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