World shares headed for their best week in over a month on Friday, though alarm bells over global growth were ringing in metals markets as copper hovered at its lowest level since 2009 and nickel since 2003.
The commodities crunch was compounded as the dollar began to flex its muscles again after a quiet couple of days, gold slipped back towards a 5-year low and as a major sea freight index hit its lowest level on record.
Global stock markets seemed largely oblivious, however. European shares were barely budged as the main London, Frankfurt and Paris markets headed for 2-3.5% weekly gains and Tokyo’s Nikkei ended Asia’s week near a three-month high.
The euro was sent tumbling back below $1.07 to $1.06 as Mario Draghi gave the clearest hint yet that the ECB will expand its already €1 trillion stimulus program next month and cut its key deposit rate even deeper into negative territory.
The expected divergence pushed the dollar back up towards a 7-month high against a basket of top currencies in early European trading. Goldman Sachs on Thursday made a stronger greenback its top trade tip for 2016.
The prospect of higher Fed rates and dollar, alongside concerns about China’s economic health continue to create uncertainty.
Metals
Copper–seen as a good gauge of the global economy because of its wide industrial use–has been hit by persistent worries that supply cuts won’t be enough to offset the pressure on prices caused by weak demand in top user China.
It slumped to a 6-1/2-year low of $4,573.50 per ton before bouncing back to $4,650.00, still down 3.8 percent so far this week.
The Baltic Index, which tracks rates for ships carrying dry bulk commodities and is viewed as a good reflection of the health of world trade, fell to a record low, having fallen 58.8% from its peak this year.
“Many economies in Asia and emerging markets are still not doing that good. Demand for raw materials remain very weak,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
Oil Predictions
Oil prices were also not far from near three-month lows hit earlier this week. Global benchmark Brent futures last stood at $44.40 per barrel, compared to Monday’s low of $43.15 as US crude sat just above $40 a barrel.
Crude futures have already lost around 60% of their value since mid-2014 as supply exceeds demand by roughly 0.7 million to 2.5 million barrels per day to create a glut that analysts say will last well into 2016.
Market data also suggests oil traders are preparing for another drop in prices by March, as what is expected to be an unusually warm US winter dents demand just as Iran’s exports hit global markets after its sanctions are ended.
