Friday 18th July 2008
To grow or not to grow?
Oil came off further yesterday at one point below $130 a barrel. Rather than being a reduction in demand for oil it seems more centred on US sentiment that they would dip into their own strategic supply if necessary. On the back of this drop, the US Dollar made gains and the Dow Jones recovered somewhat, moving away from bear market country. Oil was not the only mover with natural gas coming off recent highs to levels not seen since early May. It was also a much better day for equity markets with house builders and banks both making gains from their previous deflated levels.
Today we have seen the German Producer Prices Inflation figure which reported the highest rise in 26 years. As with other global PPI increases, this sharp rise is again on the back of high commodity and energy prices. Since the release of the figures, Trichet has been talking about the lack of sustainable growth within the EuroZone now being the main focus. This is starting to become a common trend amongst Central Bank Heads with Bernanke, King and now Trichet all indicating that they are not looking to try and manipulate inflation in the short term (a futile exercise anyway) but to concentrate on ensuring that growth is the immediate focus.
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