Tuesday, April 28, 2009

Oil, Metals, Hogs Drop on Outlook for Demand After Swine Flu

Monday morning I was asked why I had posted so many swine flu links over the weekend. The short answer is: "Because it could affect everything*, including every market".
Here are just a few, commodities, from Bloomberg:
Crude oil, industrial metals and hog futures dropped for a second day on speculation a global outbreak of swine flu will derail efforts to shore up economies, curbing demand for raw materials.

Hogs fell in Chicago trading on expectations that pork consumption will sag. Copper, aluminum and other metals retreated in London on the prospects for economic growth and crude oil weakened in New York on the outlook for air travel.

“It’s a worry about the global economy and demand,” said Charles Kernot, a commodities analyst at London-based Evolution Securities Ltd. “If it’s affected by the swine flu, stocks will build up and prices will fall. People are hedging their positions a bit, just in case it turns into a pandemic.”

The swine flu outbreak, which the World Health Organization says is no longer containable, threatens to end the 8.2 percent rally in commodity prices that began in March. Copper demand was already forecast by Macquarie Group Ltd. to shrink the most since 1975, while the International Energy Agency expects the first back-to-back drop in annual oil demand since 1983....MORE

*From "Grid: "Yeah but have you planned for this, Mr. Risk Modeler?"':

Last March, I began the post "Markets: I Scream, Triple Dip" by saying:

Among other duties (coffee A.M, turn out lights P.M.) I think of likely (and more importantly, unlikely) scenarios of where the markets might be heading....
Everybody starts with the basics, Tokyo earthquake, flu pandemic etc. but now it looks like it's back to the old algorithm....