Have the cooling fans been switched on in the commodities market?

András Cserháti
Senior Product Manager

What happens if China applies the brakes, or if the Australians slaughter their cash cow?

With the credit-rating downgrade that occurred in a number of the PIIGS countries, combined with the initial signs of an impending slump in the equity markets, commodity market indices have also begun to head south. All this is not at all surprising given that commodity markets are notoriously sensitive to economic circumstances and react immediately to trends in the equity markets.

The dramatic events in Greece and the postponement of the Greek rescue package until the very last minute shocked the markets, as did the frightening increase in sovereign risk represented by countries (Portugal, Spain, Italy, Ireland and the United Kingdom) struggling with similarly high public finance deficits and national debt in proportion to GDP. Other developments have also taken place, however, some of them supporting and others exerting a powerful negative impact on the commodities markets.

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