Commodities and Inflation in Slow Global Economy

Commodities and inflation remain the main story, and while stocks are well off their July lows, the advance remains tentative due to concerns about a slower global economy.

Oil was down as Russia announced it was halting its offensive in Georgia early this morning, but has since rebounded. The Russian stock market, which hit a new low this morning, has rebounded and is now up 3 percent.

Same with gold, which hit a 7-month low intraday, then rebounded. Copper also hit a 6-month low. The Goldman Sachs Commodity Index entered bear market territory, 20 percent off its July high, last week.

Commodity-related stocks like BHP Billington , and shipping company Frontline are all trading down this morning.

Inflation in the U.K. rose 4.4 percent from a year earlier, twice expectations. Still, economic conditions in the U.K. are deteriorating: home prices and retail sales have been falling, while oil and food costs have been rising. Bottom line: it's going to be tough to raise rates in this environment; the bet is that the next move in London will be lower rates, not higher.

Similar situation in France, where French CPI rose 4% year-over-year; Japanese PPI also rose more than expected.


1) UBS posted a worse than expected loss of about $330 million for the second quarter, but the more important news is the splitting off its investment banking business from its more-profitable wealth management businesss--many think this is the first phase of selling off the business entirely.

2) JP Morgan incurred losses of about $1.5 b since July as credit spreads have widened on mortgage-backed securities.

3) Goldman Sachs downgraded at Deutsche Bank , saying the firm's high exposure to equities would result in weaker than expected earnings, estimates were also cut by Meredith Whitney at Oppenheimer. The brokers have seen very little in the way of a rally since the July botttom.

Questions? Comments?