Groundhog Day again as Quarter 4 starts

D'turn 8Oct11.pngThe great film comedy Groundhog Day saw Bill Murray doomed to repeat the same day in his life, until he learnt to become a better person. Sadly, financial markets have yet to learn from his example.

Every quarter, the investment banks produce new stories aimed at pushing stock/oil markets higher. Then high-frequency traders make $millions in seconds by bidding prices higher.

This week saw the same pattern yet again as Q4 began.

Reuters, not known for its sensationalism, carries a detailed account of how the computers pushed prices 4% higher in the last hour of Tuesday’s New York trading. Those who haven’t yet read our own account of the process in Chapter 3 of ‘Boom, Gloom and the New Normal’, may well be amazed by the report.

Yet 3 days later, the Governor of the Bank of England, not normally an alarmist, told the BBC that: “This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever.”

It is a measure of the dysfunctionality of our financial systems that the two events could occur so close to each other.

The real world in which chemical companies operate confirms the Governor’s outlook. The chart above shows price movements since the beginning of the year. It highlights the complete change of direction since the IeC Downturn Alert’s launch on 29 April.

ICIS pricing comments this week are below:

Benzene NWE (green), down 17%. “Benzene players continue to struggle with softening demand and overall bearish sentiment.”
S&P 500 Index (pink dot), down 9%.
PTA China (red), down 7%. “Market remained unchanged because of China’s National Day holiday from 1-7 October.”
Naphtha Europe (brown dash), up 3%. “Demand from the petrochemical industry remains poor, while from the gasoline sector it is mediocre.”
HDPE USA export (purple), up 5%. “Prices trending lower based on plentiful supply and low feedstock costs.”
Brent crude oil, up 9%.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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