Corporate Communications

VTB Capital holds roundtable discussion on global macro and commodities outlook

11 November 2014

VTB Capital held a roundtable discussion entitled Global Macro and Commodities Outlook on 11 November, 2014. The meeting was hosted by Wiktor Bielski, Head of London Research at VTB Capital, and Neil MacKinnon, Global Macro Strategist at VTB Capital. The event, held in London, was attended by a number financial journalists, academics, researchers and think-tank members.

Neil MacKinnon examined the possible global trends for the year ahead and said that recent optimism about US and UK growth forecasts must be tempered with caution. He said that there were many reasons why central bankers and policy-makers should remain worried about next year. “While 3 per cent and 3.5 per cent growth in the UK and US looked promising in the short-term”, MacKinnon said, “this could be the height of the cycle we see before QE (Quantitative Easing) starts to be pulled back, and interests begin to slowly rise, meaning a possible slide back into recession.” Germany, MacKinnon noted, was one of the main reasons the Eurozone continued to disappoint.

Examining the effect of QE in closer detail, MacKinnon was in no doubt who the real winners were out of the policy. “Cash rich corporates are not investing in assets, but are actually buying back their own stock, meaning Wall Street is a winner while Main Street loses out. It also means that stock markets are actually more precarious,” he said. Asked what he thought the chances were of the global economy tipping back into recession next year, MacKinnon said in his opinion it was a “40 per cent chance” and claimed he was being “optimistic”.

Wiktor Bielski focused on the recent fall in commodity prices and the impact of the strong dollar on long-term prices. Although the outlook for commodities appears negative with leading commodity indices at 5-year lows, Wiktor Bielski commented that the underlying fundamentals by historical standards “were much stronger than prices suggest”. Looking at other “headwinds”, Wiktor Bielski claimed that China’s slow-down was a big concern, mainly due to the recent drag in the property sector. Wiktor Bielski mentioned that the property sector is the big driver of the Chinese economy, and that the slowdown had a negative impact on steel trading since the start of the year.

Wiktor Bielski also questioned the veracity of the claim that a rebounding dollar was the only driver behind the slump in prices. Yes, it was a factor, Bielski claimed, but he also looked at sluggish demand, low growth in emerging markets, and the rise of speculative commodities trading, particularly in China. Regarding the recent huge increase in speculative fund trading in commodities, particularly in China, Bielski referred to the Dalian Commodity Exchange which had grown at an unprecedented pace, but now resembled a “casino” rather than a normal commodity market. It was, he claimed, all speculative trading with no physical trades at all. Chinese speculators represent a major risk for all commodities markets in the medium-term, and Bielski warned that unless the market cooled, it could substantially distort commodity prices for a long time yet.


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