English summary – Commodities correction taking shape, market shake-up in view

This week’s figures from the US Energy Information Administration (EIA) seem to have stopped traders speculating on rising prices in an overheating oil market. Lower inventories, higher production and lower US imports raised doubts about whether the current oil price is fair, after market euphoria in the last few months took it from $46 per barrel on average in June to over $71 on 25 January. The price of Brent North Sea crude, which had been wavering since the previous weekly report, gave way after Wednesday’s figures and seemed on track to end the week below $64.

Bond yields have barely responded to the move so far. However, that may not last if, as we expect, oil prices keep falling and drag metals down with them, since the rise in metals prices in the last few months has little fundamental justification.

If our scenario proves correct, that would seriously change the context, affecting inflation expectations, bond yields, the forex market and the relative performance of emerging markets and individual sectors. Overall, there is a significant risk that developments seen in the last few weeks will reverse as quickly as they occurred.

Although such adjustments could reduce the downward pressure on indexes resulting from fears that interest rates will rise too quickly, they would definitively rule out the reflation scenario that the markets have been overwhelmingly backing since mid-December. In the best-case scenario, this could stall the correction, without necessarily pushing markets back up to their recent highs.

English translation by trafine


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Has the time come for commodity markets to increase again?

After three years of stagnation, a growing number of investors have been tempted to think so in recent weeks. This renewed interest is hardly surprising given that equity markets are brimming with confidence in the belief that the global economic picture is gradually improving.

Our contrarian economic outlook is naturally quite skeptical of a recovery in global commodity prices. Despite geopolitical and weather-related stress, the international environment runs the risk of suffering a broad downturn amid rampant disinflation and ongoing growth disappointments. Against this backdrop, it would be gold that stands the most likely chance of increasing in value…assuming that long-term real interest rates weaken.



1. Unusually stable prices since 2012 

2. Energy bills generally manageable… 

3. … thanks to falling consumption 

4. Keeping an eye on agriculture… 

5. Precious metals: end of QE could trigger a rise… 

Global Inflation – Disinflation Is Gaining Ground Across the Globe

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At the global level, disinflation is gaining ground. After a temporary rebound during spring, global inflation continued its downtrend in the second half of 2013 and ended the year at 3.2%. Inflation remains very weak in the developed world, at 1.3% in December, and has also sagged in many emerging markets in recent months, to finish 2013 at 6.1%.

In fact, as of December 2013, nearly half the countries (39) in our sample of 80 countries had inflation rates of less than 2%, which is markedly higher than a year ago (24). These figures have seen the addition of a growing number of Asian economies (6), the United States and Canada as well as all 27 members of the EU – without exception. Moreover, the number of countries with moderate inflation (3-4%) decreased sharply while the proportion of high-inflation economies (>6%) has not changed considerably and includes African countries and conflict-plagued countries for the most part.

  • Disinflation Is Gaining Ground Across the Globe
  • Commodity Prices Easing
  • Price Picture Still Mixed in EMs
  • Deflation Risk Remains High in the West  
  • United States, Not Quite in the Clear Yet
  • Euro Area, Deflation Risk Spreading to Core
  • Imports, an Additional Source of Disinflation
  • Increase in Real Interest Rates, the Bigger Threat

Global Inflation

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The Gold Selloff as Warning Sign for Impending Deflation

Recent disappointment with a sluggish economy has altered perceptions about the risk of inflation. Since the beginning of March, ten-year inflation expectations in the U.S. bond market have shed 30 basis points, the sharpest decline in the past year. At the same time, plummeting gold prices bear witness to growing doubts about the reflationary policies pursued by central banks. Moreover, current global trends suggest that this sentiment won’t be changing any time soon:

  • With inflation rates well below 2 percent and still receding, most industrialized countries are inching their way toward deflationary territory. High unemployment and low capacity utilization rates exert strong downward pressure on wages and producer prices, a trend accentuated by softer energy prices. 
  • The rising inflation observed in an increasing number of emerging economies is in fact limited to those with little global influence, primarily India, Russia, Brazil, and Argentina. Asia’s exporters of manufactured goods still show low inflation rates that are much closer to those in the advanced countries. 

 All these developments should therefore encourage central banks the world over to go further with monetary easing.