June 22, 2009
Oil Prices Force Market Downtrend
Stock commodities have taken a hit recently thanks to lower oil and metal prices which has forced commodity stocks down, resulting in dampened sentiments from the World Bank.
With the recent news of oil and metal prices, the Dow Jones fell over 2.4% after the price of oil dropped to below $67 a barrel. This was alongside similar reductions in both the German and French markets.
As a result, the World Bank commented that it expects the economic growth of developing nations to slow, and as a result it has forecasted minimal growth predicting a rise of just 1.2% of the GDP compared to previous years seeing 5.9% in 2008 and 8.1% in 2007 respectively.
Analysts have argued that this downtrend comes as a result of too much complacency and optimism regarding the current financial crisis. It would seem that this is proof that the current situation warrants caution thanks to the World Bank’s Report.
Specifically, the drops were noted worldwide seeing the Dow Jones index closing 200 points lower than expected, thanks to the downtrend in US light sweet crude which dropped over $2.60 to just $66.93 per barrel.
Oil industries and mining stocks observed the greatest falls, with the UK market witnessing BP shares declining over 3.8% and Royal Dutch Shell loosing 4.7% in value.
After the day’s trading, the FTSE 100 closed 2.6% down at 4,234.
This news comes at the same time as the Organization for Economic Co-operation and development announced that the pace of decline in world economies is slowing whilst at the same time stressing the fact that 2009 may very well be the worst year for the global economy since World War II.
Together with confusing news of increased industrial growth, and economic output – it is clear that the recession is not over and the world economy is still at threat. The current down-trend in oil prices is just another example reinforcing caution as economies are not yet stable.
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