The rough start to 2016 continued this week with major indices giving up more ground. In fact, it’s the single worst start to a year for stocks in history, with lack of global growth and oil price deflation driving selling.
China's Shanghai Composite has now fallen over 21% along with Europe’s STOXX 600 declining over 20%, sending both indices into Bear Market territory. In Europe, over 1 Trillion Euros has disappeared from the market place since the beginning of the year.
North America faired slightly better. According to Bloomberg, both the DOW and S&P posted close to a 9% decline, the NASDAQ down 11%, and the TSX lost almost to 8%, from the beginning of trading this year. Oil hit yet a new 12 year low this week falling under $30 per barrel, a level not seen since 2004. With US inventories at 483 million barrels, crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. And with Iran set to add another half a million barrels per day to this oversupplied market, now that economic sanctions have been lifted, I expect oil to remain under pressure for some time.
Gold held its own closing at $1088, a small decline form last week’s close of $1101 and Silver saw little movement ending down 2 cents on the week at $13.93.
In Copper, we did indeed fall below the $2 level, ending the week at $1.94. On a side note, a BNN interview this week revealed that copper consumption from Western Economies is actually down by 1% over the past decade. The driver for copper has been emerging economies, specifically China which recently accounted for 40% of global copper consumption, and now that their economies are slowing and moving towards a more consumer or service based model, copper prices aren’t expected to move higher any time soon.
Ultimately, we need to see oil price and Chinese currency stabilization, and for that to happen, we need to see some good news in the global economy. Jason Goepfert of SentimenTrader commented that the indices have had two 10% corrections in a rather short span. That has only happened three times in the last 100 years. Unfortunately, those occurrences were in 1929, 2000 and 2008. As you may recall, those were not particularly good years for the bulls".
These are uncertain times and the markets are definitely reflecting that.
For MiningClips.com, I’m Erick Bertsch.