It seemed like the initial threat to western markets was from China, but that threat has expanded with a lengthening pattern of slack US data.
Just when it appeared that sentiment had reached a trough, the crude oil market dragged commodities down even further.
The deflationary selling binge in commodities has continued with a vengeance, with sagging crude oil prices leading the way.
The US Federal Reserve appeared to be “threading the needle” with their narrative supporting a December interest rate hike, as they emphasized that the future rate path will be slow and gradual.
Risk sentiment received a shot in the arm last week after the latest FOMC meeting tamped down concerns over global growth and used more decisive language in favor of a December interest rate hike.
The challenges for physical commodities are slack global demand, the Dollar remains strong and commodity supplies are generally burdensome.
The US economic pendulum has shifted again, with data flows generally remaining disappointing and little of any improvement in activity in the face of better weather.
Economic skies continue to brighten as some of the most troubled areas of the world (the Euro zone and Japan) are beginning to show some improvement and the only major nations that appear to be degrading are Brazil and Russia.
Global Negative Sentiment in many ways has probably already exceeded rationality. To the bears’ credit, unrelenting declines in crude oil, copper and equities justifies some fear of slackening demand.