market outlook

Recession now a reality in major economies from Japan to Germany, policymakers is starting to fret about the chance of a phenomenon many see as even more deadly: deflation. Deflation is probably the worst case for the financial sector because it is very difficult to overcome. The prospect of constantly falling prices is particularly unwelcome at present given the blow it deals to efforts by banks, firms and households to cut debt and help weather the economic storm now following the financial market crisis. Central banks, faced with a sudden collapse in growth as well as inflation, have already slashed interest rates and are expected to keep doing so,although economists warn they may run out of rope before prices hit rock-bottom.

Gold rose above $760, as a weaker dollar and a bullish industry report showing strong demand triggered a technical chart breakout. Prices were supported by a lower dollar against the Euro following a government report showing record drop in U.S. consumer prices in October. World Gold Council report confirmed strong demand for physical gold bullion, triggering a technical breakout. Global demand for gold jumped 18 percent year-overyear to 1,133.4 tonnes in the third quarter, reversing a weaker trend earlier this year, because of strong buying by investors and a lower gold price.

Copper tumbled more than 2 percent before steadying at slightly lower levels as a weaker dollar helped offset lingering concerns about demand and a slowing global growth outlook. Dim demand prospects and fears the world is in for an extended recession have contributed to the downtrend in the base metals. U.S. consumer prices plummeted and construction starts fell to record lows, reflective of the weakened state of metal demand. Further fears of demand deterioration from the U.S. automotive industry as the economic crisis threatens the survival of Detroit's Big Three General Motors Corp, Ford Motor Co and Chrysler LLC. Global copper market in a small surplus of 26,800 tonnes in January to September period - the World Bureau of Metal Statistics (WBMS) reported.

Crude oil fell below $54 to its lowest since January 2007 after an unexpectedly large build in U.S. crude inventories underlined falling demand. Crude oil inventories rose 1.6 million barrels, weekly U.S. government data showed, twice analysts' expectations. With no end in sight for the global economic turmoil, traders continue to focus on the lack of demand heading into 2009. Inventories of distillates fell 1.5 million barrels last week, against analysts' expectations for a 600,000 barrel rise. The distillates number is the fly in the ointment keeping prices from falling too much on an unexpected build in crude. Oil market was also closely watching any moves from the Organization of the Petroleum Exporting Countries (OPEC) at their meeting next week. OPEC is very concerned about the worsening world economic slowdown, the group's president Chakib Khelil said.'


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