LONDON - 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 saw a subdued star as investors, who had been expecting to spend the day mostly looking at U.S. jobs data - that came in strongly - and ahead to Sunday's French election, were caught off guard.

Both Brent and U.S. crude fell more than 3 per cent overnight amid record trading volumes on mounting concerns about global oversupply.

Things only fully stabilized 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 US$48.40 a barrel almost two dollars better off than its overnight low, but the scars left it 6 per cent 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 per cent in Shanghai overnight after tumbling 8 per cent on Thursday.

Mining giant Rio Tinto (RIO.L) hit a six-month low, Glencore (GLEN.L) was set for its worst weekly loss in two months and copper miner Antofagasta (ANTO.L) 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."


In calmer waters, the euro  touched a six-month high of almost $1.10 ahead of France's election, in which polls expect centrist Emmanuel Macron to convincingly beat right-wing, 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 per cent rise for the week. World shares are up for a third week and 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.

Better-than-expected U.S. non-farm payrolls data showed jobs growth rebounded sharply last month with 211,000 added and the national unemployment rate down to near a 10-year low at 4.4 percent.

The dollar and U.S. government bond yields <US10YT=RR> barely budged though. Both had been nudged lower by the commodity market worries. It is set to be the fourth weekly fall on the trot for the greenback, 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.

"With continued solid job growth, the U.S. economic expansion will continue throughout 2017. The Fed will raise the federal funds rate again in mid-June as the economy is approaching full employment," said Gus Faucher, chief economist at PNC Financial in Pittsburgh.

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 <.MSCIEF> 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 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)."