Oct. 3 (Bloomberg) -- Oil, copper, and corn drove commodities toward their biggest weekly decline in more than 50 years on concern that the worst financial crisis since the Great Depression will push the U.S. into recession.

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have tumbled 9.9 percent this week, the most since at least 1956. Manufacturing declined to a 7-year low in the U.S. and contracted at the fastest pace in 16 years in the U.K. last month. Initial jobless claims rose to the highest since 2001, the U.S. Labor Department said yesterday.

``Panic, risk aversion and liquidation of contracts are characterizing the oil market as well as many other markets at the moment,'' said Thina Saltvedt, a Nordea Bank AB analyst in Oslo. ``Prices are not only being set by fundamentals, but fears of how crises in the financial sector may spread to other parts of the economy.''

Crude oil has lost 12 percent this week, the most since 2004. The contract for November delivery traded at $94.47 a barrel, up 0.5 percent, as of 12:11 p.m. London time.

The UBS Bloomberg CMCI Index of 26 raw materials is having its worst week since at least 1997 amid skepticism that a U.S. government $700 billion bank bailout plan won't be enough to stimulate economic growth and demand for commodities.

UBS AG, the European bank hardest hit by the credit crisis, said today it scaled down its commodities business and cut jobs, retaining only the precious metals operations, the commodity indexing unit, and exchange-traded commodity derivatives trade.

`Demand Destruction'

``If global equity markets continue to trend lower, they should remain the overwhelming force and most commodities are likely to suffer as demand destruction and economic contraction become paramount,'' Michael McGlone, a director in commodity indexing at Standard & Poor's in New York, said today in a report.

Copper fell as much as 3.1 percent to $5,670 a ton on the London Metal Exchange, the lowest since February 2007 and is heading for its biggest weekly loss in more than two decades.

``There are three commodities I watch for weakness: steel, iron ore and copper and all continue to weaken,'' said Daniel Brebner, executive director of commodity research at UBS AG in London. ``The news flow is likely to continue to push those commodities in the same direction over the near term.''

U.S. employers probably eliminated 105,000 jobs last month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington. The unemployment rate held at a five-year high of 6.1 percent, according to a separate survey.

Payrolls Numbers

A ``very weak'' non-farm payrolls number could see commodities ``remain under pressure,'' Walter de Wet, Standard Bank Group Ltd. analyst in Johannesburg, said in an e-mail late yesterday.

Commodities also fell as the euro headed for its largest ever weekly decline against the U.S. currency on signs that Europe's economy is slowing.

U.S. lawmakers who helped defeat the financial-market rescue package this week are reconsidering their votes following signs the crisis on Wall Street is spreading. The legislation to be voted on by the House of Representatives later today allows the government to buy troubled assets from financial institutions rocked by record home foreclosures.

Corn for December delivery added 3 cents, or 0.7 percent, at $4.55 a bushel as of 12:40 p.m. London time on the Chicago Board of Trade. Still, it has lost 16 percent this week.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Last Updated: October 3, 2008 08:59 EDT