We have seen quite some volatility over the last
few days, which have been terrible for commodities firms on global stockmarkets.
Which always begs the question……what on earth is
going on?
Dead simple……simply look at the 2 big players in
the world economy for your answer. China and USA have much to answer for.
Firstly, China. The slowdown in the Chinese economy
has been weighing on commodity prices. Investor decisions that were taken three
or four years ago when China’s economy was growing at around 10% have led to
a problem of oversupply in commodities.
Secondly, the US. In the background there is a
distinct prospect of an interest rate hike in the US. This will lead to a stronger
dollar and will make commodities more expensive because they are priced in
dollars.
This reducing supply / demand at the same time of
the prospect of a strong dollar creates a ‘marmite cocktail’……the cherry and
sparkler on the top being prices further exacerbated by investor sentiment. Quite
a cocktail that not all came stomach.
Until the stimulus pushed through in China last
month begins to show results, we can expect to see some continue turbulence.
Interesting times
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