The accumulation of evidence over the past week that large swathes of Europe are in a deeper recession than expected has weighed heavily on commodity prices.
Brent crude fell to USD 113 a barrel on Friday, a three-month low; during March, Brent averaged USD 125 so for embattled consumers there is the hope that prices on the forecourt will soon reflect this recent downward move. Reduced oil demand has resulted in significant oversupply, with US crude inventories at a 21yr high. Also, some senior members of OPEC have repeatedly voiced their displeasure at the current level of prices. Coal prices for Asian power stations are at an 18mth low, reflecting a marked slowing in power output in China. The gold price has also been disappointing, which is interesting in itself because gold has usually excelled during those phases when risk appetite has waned. Unsurprisingly, high-beta currencies are suffering as well, with the Aussie under 1.02, its lowest level for the year, and the Kiwi trading below 0.80.
That old adage, sell in May and go away, seems to be ringing true once more.
