The tone of the global economy has deteriorated over the last month, and it has become apparent that portions of the Euro zone were much softer than expected during the second quarter.
The US recovery looks destined to sneak up on the markets, particularly with the Treasury market.
The track of the US economy is important, but seeing a trend of better economic news from China is probably more important to physical commodity markets.
Global economic progress is apparently faltering, and noted fund managers are warning against having “too much equity market exposure.”
Into the end of April, the US economy was clawing its way toward self-propagating growth, but clearly recent growth has not been strong enough.
The list of positive global data flows expanded last week with improvements in UK Unemployment, China Retail Sales, and US February and March Industrial Production figures.
Into the early April high in equities, global economic sentiment was hopeful of a quick return to a progressive recovery pace.
Geopolitical headwinds and sub-par spring weather continues to hold back the US recovery. Periodic angst from credit concerns in China, speculation that Putin wants more “living space” and lingering deflationary concerns in Europe have also left sentiment bruised all the way into the end of the first quarter!
Make no mistake: The ebb and flow of Chinese physical commodity demand remain paramount to commodity price trends! Clearly Chinese growth has slowed, and clearly there has been an added fear of credit turmoil inside of China with their recent bond failure.