‘This market downturn is worse than ’08’ – Scotiabank – by Kip Keen (September 1, 2015)


Comparing this downturn with others in recent memory.

HALIFAX – The last major downturn in commodities – during the 2008/09 financial crisis – was the central focus of Scotiabank analyst Patricia Mohr’s latest missive on metals and energy commodities.

Mohr – Scotiabank’s commodities guru – noted that Scotiabank’s commodities index, comprising, energy, metals, and fertilizers, dropped below levels last seen during the relatively brief rout in commodities seven years ago.

“The All Items Index is now well below the bottom touched during the ‘Great Recession’,” Mohr pointed out in a recent report.

“While many commodity prices remain above 2008/09 recessionary lows, current weakness is broader based and reflects a prolonged period of sub-par global growth.”

In particular, she highlights the latest weakness in oil prices amid declining metal prices. “An ongoing battle for market share in oil — recently exacerbated by heightened concern over a further slowing in the Chinese economy — combined with consternation over possible Fed monetary policy tightening in September have largely accounted for commodity price weakness.”

She adds, “The strength of the trade-weighted US dollar (against 26 currencies) has had a notable deflationary impact on commodity prices, most of which are priced in US dollars.”

Dollar mauls US miners

The strength of the US dollar, as other analysts have noted, has in fact helped miners outside the US survive the rout in the commodities.

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