Just few months back all the commodities including crude oil, copper, zinc, aluminum and lead reached multi year low. Crude was languishing around 35 dollars a barrel which was just 25% of the peak of 147 dollars reached nearly ten months back.
But all the commodity prices have started shooting up once again in the last few months, not because of any recovery in the US or Europe demand. The key reason behind the increase in commodity prices is the sudden surge in Chinese demand.
The Chinese government has gone into massive stimulus spending for spurring domestic demand in the last few months. The 550 billion dollar stimulus plan has forced many companies to start piling up all commodity stocks for their future requirements.
The unexpected surge in demand from China has resulted in over 20% increase in commodity prices. Aluminum prices have surged by over 25%, whereas copper has seen a 30% increase. Even crude oil prices are higher by over 40% from their lows.
If China is able to hold on to its growth for next few months, then the commodity prices may not see any major decline in the next several quarters. By then US and Europe would have started recovering, we hope.
Archive for May, 2009
Global commodity prices zoom due to China effect
India votes for a stable government for next 5 years
The second most populous country in the world, India, went for polls last month. The exit polls indicated that the country is heading for a hung parliament and was all set for a uncertain period. The various exit polls were unanimous on this, and they differed only on the variance margin.
But the results announced few days back were totally shocking even for the winner I.e, the Congress party and its allies. The Congress party ended up gobbling up 200 seats on its own, and including its electoral allies it was way ahead of the 272 seats.
This has come as a big relief for millions of Indians and also for the scores of Foreign investors who have put their money into Indian stock market. The previous government could not take up the reforms in a big way only because it was a minority government. It depended on the left parties for passing every bill in parliament. The left parties are no where in the scene post results. This is expected to help the ruling party to push all the reforms in the next five years.
The stock markets were instantly reacting to the unexpected results, by surging up by over 20% in the first three trading sessions post the results.
