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Rising energy prices ‘setback for growth’

Manama, August 10, 2011

The outlook for global growth is deteriorating, partly as a consequence of rising food and energy prices, and risk appetite has suffered as a consequence, said an expert.

Carnage in currency and bond markets spilled over to equities and commodities last week, according to Saxo Bank senior client adviser Ole Hansen.

'The world's most followed equity index, the S&P 500 index, dropped below its 200-day moving average erasing all of its 2011 gains in the process,' he said.

'Investors looking for safety scrambled into the Swiss franc and yen before the central banks of the two nations had enough and announced measures to curb further currency appreciation,' he added.

'In commodities, gold made a new nominal record high as investors and central banks continued to increase exposure to the yellow metal. The commodity sector got hammered with the three major indices moving back into negative territory for the year with the base metals and energy sectors especially suffering heavy losses,' he said.

'The impact on global activity of a 40 per cent rise in Brent crude from the 2010 average is now clear and the fragile economic recovery has not been able to cope with the price rises over the past six to nine months. Commodities in general will have a bumpy ride in the weeks ahead,' he added.

'As the European debt situation continues to frighten investors they now also have to contemplate the risk of a double-dip recession in the US. A third round of quantitative easing, which up until recently was dead and buried, could resurface thereby supporting tangible assets such as commodities just like it did throughout 2010,' he concluded. – TradeArabia News Service




Tags: growth | Commodities | Manama | Saxo Bank | Risk appetite | Energy prices |

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