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Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Citi research predicts a sustainable rally in commodity prices while signs of a global recession build. Confusing, but that's where we're at right now with markets.

Gluskin Sheff's David Rosenberg, arguably Canada's most prominent economist, wrote a column for Business Insider warning that a U.S. recession is becoming more likely in the wake of Friday's weak U.S. employment numbers,

"First, goods-producing employment declined 36,000, which was the steepest falloff since February 2010. But this is not just one data-point but a visible weakening trend — this critical cyclically sensitive segment of the economy has contracted now for four months in a row and the cumulative damage is 77,000 jobs or a -1.2-per-cent annual rate. I don't want to alarm anyone but the facts are the facts, and the fact here is simply that this is precisely the sort of rundown we saw in November 1969, May 1974, December 1979, October 1989, November 2000 and May 2007. Each one of these periods presaged a recession just a few months later — the average being five months."

Last week, I pointed out OECD Secretary General Angel Gurria's statements that global trade growth remains below global GDP growth, which has only happened five times in the past 50 years and presaged a sharp global slowdown each time. (Mr. Gurria also noted, however, that the OECD is not predicting a recession this time.)

"DAVID ROSENBERG: I don't want to alarm anyone but ..." – Business Insider

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Commodity analysts at Citi have a much different and more positive view. Unconcerned with global economic weakness, analyst Aakash Doshi believes the fundamentals are in place for a sustained rally in commodity prices,

"This year the recovery seems real, despite weaker global growth, as bullish rebalancing unfolds across physical commodity markets, from energy, to ags and even some metals. On the energy side, material and endemic supply disruptions have sharply tightened oil markets, while gas markets have finally started to see tangible production declines. In ags, weather risk from a likely La Nina this fall and supply disruptions in LatAm are pushing grain prices higher. Indeed, across the complex, physical tightening is emerging and investors and prices are following suit. We think that this year commodity flow activity may finally buck the trend of 2H outflows."

"@sbarlow_ROB Citi: 2016 commodities rally better grounded than 2015's pic.twitter.com/RtLkCnQ3dq " – (research excerpt) – Twitter
"Commodities beating global bonds and stocks in 2016" – Financial Times

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Three decades ago, Saudi oil minister Sheikh Zaki Yamani famously noted that "the Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil." We are clearly many, many years away from the end of the oil age, but a recent report from Bernstein research argues that the upcoming partial privatization of Saudi Aramco might represent the country's government getting ready to pump out all its oil before no one wants it,

"Perhaps Aramco's growth will be focused on refining and natural gas, but it is possible that Saudi have also realized that demand is likely to run out before supply and it makes more sense to deplete their own reserves ahead of others. While this is pure conjecture at this point, it could have bearish implications for oil markets.'

"Saudi Aramco, a race to the bottom?" – Keohane, FT Alphaville
"Oil Near 'Sweet Spot' Puts 70-Year-Old U.S. Index Back in Focus" – Bloomberg
See also "Norway Moves Towards Banning Gas-Burning Cars By 2025" – Fortune
"Germany had so much renewable energy on Sunday that it had to pay people to use electricity" – Quartz (May 10, 2016)

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Federal Reserve chairwoman Janet Yellen is speaking today, and her comments could very well move markets. But because I'm running out of room, I'll just have to leave a couple of links to prepare investors,

"What to Expect From Janet Yellen's Speech" – Bloomberg
"THOUGHTS ON THE AFTERMATH" – Macro Man

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Tweet of the day: "@ReutersJamie Probability of a US recession in next 12 months rises to a cycle high of 36%, says JP Morgan. Was 30% a month ago. pic.twitter.com/jAYY8qeeBD" – Twitter

Diversion: "These are the 18 most corrupt countries in the developed world" – Business Insider

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