Commodities expected to play catch-up – by Brenda Bouw (Globe and Mail – August 8, 2011)
The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media. Brenda Bouw is the Globe’s mining reporter.
Commodity stocks have been hit harder than the price of the products themselves during the recent rout on global markets, a sign that commodities have further to fall as fears of another recession intensify.
Investors need only refer back to the last global recession to see how the sharp drop in mining, agriculture and energy stocks eventually led to a slump in prices for commodities such as copper, potash and oil.
While commodities have held up relatively well in recent days, in comparison with their related stocks, analysts say that could change if the market freefall continues.
“It is not unusual for falls (or rises) in the prices of commodity-related equities to be of a different magnitude to falls (or rises) in the prices of the commodities themselves. But over time, relative price fluctuations have tended to come out in the wash,” John Higgins, senior markets economist at Capital Economics, said in a recent report. Read the rest of this entry »
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