Chemical prices tend to provide a good lead on global economic conditions and the message at the moment is unambiguously negative.  Falling naphtha, polymer and Brent oil prices are indicative of very weak global economic conditions.

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Source: Variant Perception and Bloomberg

We remain sceptical of the US economy’s ability to truly de-couple from the international economy.  Although the US remains the best house in a bad economic neighbourhood, there are little signs of domestic improvement.  The much-awaited capex surge has yet to materialise (bottom chart) and industrials and semi-conductors stocks have been underperforming (with the latter stocks being heavily shorted).  Although our tactical indicators point to a market bounce, the economic pictures suggest caution on equities ahead.

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Source: Variant Perception and Bloomberg