Global stock markets and global commodity markets, led by copper, have been telling different stories for some time.
Suddenly global stock markets are starting to take notice of the message coming from the price of copper, oil and other commodities.
And in Australia we are more vulnerable because commodities represent a higher portion of our stock market than most other centres.
It is clear that this time around, unlike previous occasions, the bubble of liquidity created by the US printing money has boosted shares but not commodities. The American stock market has reached new highs and, while the Australian market did not do as well, only yesterday the main Australian share indices rose above 5,000.
Yet copper is a clear indicator of economic activity and in London copper is trading at the lowest price since August. Last night it fell for the fourth successive day on concern that demand is showing few signs of reviving as stockpiles of the metal swell.
And to confirm the copper message, last night’s statistics from the US showed the recovery is much slower than the stock market was anticipating.
Oil is reflecting the same picture although the message is confused by changes in the balance of supply and demand.
In the case of oil last night, the benchmark US crude oil contract slid $1.51, or 1.5 per cent, while wholesale New York Harbour gasoline plunged 2.6 per cent.
In the oil market we are looking at a dramatic increase in the supply of gas, which is causing a shift from oil to gas in many areas of demand. Unless we have a major war, oil is going to be weak for an extended period. In my view the bloated-cost LNG projects that are being erected by the Gorgon and the Curtis island producers face long-term head winds.
And don’t be surprised if there is a sell-off in the oil market in coming weeks as the demand and supply pressures and the sluggish global economy coincide.
Theoretically shares can continue to surge in the wake of the pressures that are sending copper lower because companies can improve their profits via cost cutting and better productivity.
But that is a rare event, which is why in coming weeks stock market investors will be on the edge of their seats.