The global economy faces deflationary pressures as the vast credit expansion of the last 4 decades comes to an end.
Commodity prices test their 2009 lows. Breach of support at 100 on the Dow Jones UBS Commodity Index would warn of further price falls.
The dramatic fall in bulk commodity prices confirms the end of China’s massive infrastructure boom.
Crude oil, through a combination of increased production and slack demand has fallen to around $60/barrel.
Falling prices have had a sharp impact on global Resources and Energy stocks….
But in the longer term, will act as a stimulus to the global economy. Already we can see an up-turn in the Harpex index of container vessel shipping rates, signaling an increase in international trade in finished goods.
The latest OECD export statistics show who the likely beneficiaries will be. Primary producers like Brazil and Russia have suffered the most, while finished goods manufacturers like China and the European Union display growth in exports. The US experienced a drop in the first quarter of 2015, but should rebound provided the Dollar does not strengthen further.
Australia and Japan offer a similar contrast.
Oil-rich Norway (-5.8%,-13.3%) has also been hard hit. Primary producers are only likely to recover much later in the economic cycle.
