Analysis: Shipping signal gnaws at market optimism

Wed Jan 25, 2012 2:00am EST
 
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By Mike Dolan

LONDON (Reuters) - A nightmare on world freight markets, where shipping prices have been decimated over the past four years, is gnawing at New Year optimism about a stabilizing world economy and shows how adept investors can be at tuning out 'inconvenient' information.

Global markets have staged an impressive start to 2012 after a dire second half to last year when economists talked openly of global depression, euro zone collapse and systemic shocks. World equities, commodities and even Italian government debt have all rallied to return between five and 10 percent so far this month.

And there's plenty of supporting news to back that up -- a wave of more positive business surveys across developed economies, improving labor markets and consumer credit in the United States, huge and cheap long-term bank financing from the European Central Bank and some benign Chinese growth numbers.

The world economy is not in freefall after all, it seems, and overpessimistic markets have re-adjusted to reflect that.

Yet, one market has so far refused to play ball. The Baltic Exchange's main sea freight index .BADI, which measures the cost of shipping dry commodities and is seen by many as a lead indicator of global trade activity, has shed more than 50 percent in just one month and is plumbing three-year lows.

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Baltic Index vs equities: link.reuters.com/waw26s

Global Asset performance in 2012: link.reuters.com/nyw85s   Continued...

 
<p>Cranes and containers are seen at the port in Lisbon January 11, 2012. REUTERS/Rafael Marchante</p>