Great Unwinding sees dollar rise, oil prices fall

Uncategorized

SHARE THIS STORY

UnwindingThe day after our China Economic Transformation webinar last week, Premier Li Keqiang confirmed its key message:

There’s already a lot of money in the pool, and we can’t rely on monetary stimulus to spur economic growth…Facing the New Normal state of the Chinese economy, we have remained level-headed and taken steps to tackle deep-seated challenges….in the latter half of the year and beyond, we will accelerate the transformation of the development model.

As the blog has argued ever since publishing its major Research Note on China in February, there will be no repeat of the panic stimulus measures taken by the previous leadership after 2008.  China is, in fact, reversing course, in order to move onto a more sustainable path for future growth.

Already, there are clear signs that 6 of the 7 key directions outlined in the Research Note are underway, and we can expect the 7th to follow in the medium-term.  It is impossible to overestimate the impact this Transformation is already having on the global economy.  And, of course, it is only just getting underway.

We had a record turnout for the webinar, and an excellent debate in the Q&A.  Many thanks to all who joined us.  If you missed the webinar, and would like a copy of the slides, please click here.

US$ IN LONGEST WINNING STREAK FOR 17 YEARS, OIL PRICES TUMBLE
This was the Wall Street Journal’s headline at the weekend, confirming that the Great Unwinding of policymaker stimulus is now well underway.  And the market data confirms this is no ‘flash in the pan’:

  • The US$ is at its highest level versus the Japanese yen since 2008
  • The euro is at its lowest level for 14 months
  • Brent oil prices are down 14% since mid-June
  • US Treasury yields have risen to 2.61%
  • Liquidity is disappearing in emerging markets as the dollar rises, and China scales back lending

New readers may like to look back at the blog’s key forecasts for the Great Unwinding

August 18:  The Great Unwinding of policymaker stimulus has begun
August 27:  Oil prices break out of their triangle – downwards
September 3:  US dollar rises as investors worry low-cost money may disappear
September 10:  Great Unwinding of policymaker stimulus creates interest rate risk

On Wednesday, the blog will look at the likely impact of this Unwinding on US equity markets.

What we are seeing is markets starting to refocus on their true role of price discovery.  They have been dominated by central bank and policymakers stimulus since 2009, as these have mounted a vain attempt to turn back the tide of demographic change.  But as the blog has noted, “You can’t print babies”.  So, in the end, this stimulus cannot return the global economy to the BabyBoomer-led growth levels of the SuperCycle.

Instead, new opportunities are opening up for companies and investors, due to the appearance for the first time in history of the New Old 55+ generation, as we describe in ‘Boom, Gloom and the New Normal’.  If policymakers had accepted this logic in the past, the Great Unwinding now underway would not have been necessary.

 

WEEKLY MARKET ROUND-UP
The blog’s weekly round-up of Benchmark price movements since January 2014 is below, with ICIS pricing comments:
Brent crude oil, down 10%
Naphtha Europe, down 8%. “Prices fell to a yearly low this week as upstream ICE Brent crude oil futures declined on rising supply and slow demand”
Benzene Europe, down 7%. “Prices dropped to a three-month low this week, with bearish downstream sentiment, tumbling upstream energy numbers and lower US pricing weighing down on the market”
PTA China, down 6%. ”Average operating rates of China’s PTA facilities has increased slightly during the week to around 55-56%”
US$: yen, up 2%
S&P 500 stock market index, up 8%
HDPE US export, up 13%. “Ongoing production problems at a few key suppliers are keeping the market tight”

 

 

PREVIOUS POST

Global stock markets still depend on low-cost money for support

12/09/2014

The blog’s 6-monthly review of global stock markets highlights the narrow ...

Learn more
NEXT POST

US PVC exports tumble as demand weakens in key markets

16/09/2014

The US PVC industry is hitting new problems, to add to the post-2006 collapse o...

Learn more
More posts
The next billion phone users will be buying $10 smart feature phones, not $1000 iPhones
10/11/2019

Smartphone sales plateaued in Q3, down 9% since Q3 2017’s peak of 1.55bn, as the chart shows....

Read
UK election offers voters no middle ground in December
03/11/2019

Pity the poor UK voters as they prepare to vote in probably the most critical election of their live...

Read
Budgeting for paradigm shifts and a debt crisis
27/10/2019

It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom...

Read
Paradigm shifts create Winners and Losers
20/10/2019

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outl...

Read
Companies ignore the Perennials 55+ generation at their peril
13/10/2019

Nearly a third of the the world’s High Income population are now in the Perennials 55+ generat...

Read
Markets face major paradigm shifts as recession approaches
06/10/2019

Major paradigm shifts are occurring in the global economy, as I describe in a new analysis for ICIS ...

Read
$50bn hole appears in New York financial markets – Fed is “looking into it”
29/09/2019

Most people would quickly notice if $50 went missing from their purse or wallet. They would certainl...

Read
Auto markets set for major disruption as Electric Vehicle sales reach tipping point
21/09/2019

Major disruption is starting to occur in the world’s largest manufacturing industry.  Hundred...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more