“The flexibility of developing economies, which turned out to relatively mild in the Great Depression of 2008 and 2009, probably will change the balance of global economic power,” says the IEA. Indeed, estimates that if the price of oil remains above the $100 at the oil trading markets this will be a threat to a fragile macroeconomic and financial situation of OECD countries. It believes that global oil consumption will increase by 1.2 million bpd or 1.3% annually over the next five years. This is 700,000 barrels more per day, compared with its previous estimate for the period 2010-2015 in December.

“Shares can only remain stable or move downward”, noted in an analysis of CNNMoney as experts explained that the corporate profits, which have so far offered some support on Wall Street, recover much faster than the real economy. The dramatic recovery in corporate profits can not be sustained as long as weak growth and high unemployment persist. The reduce costs of businesses can not continue forever as in order to safeguard the gains sales are needed.

Some analysts also speak about a “bubble” in corporate profits. For 2010, according to CNNMoney, the announced profits of companies included the S&P 500 index reached $71 per share. That is, 39% higher than 2009, when shares were on a rally and only 15% lower than the record of 81.51 dollars which was recorded in 2006. Corporate profits now represent 11.1% of GDP, when the long-term average is only 9.2%. Profitability is already too high and probably a further strengthen of it should not be expected.

Since investors can not bet on positive surprises from the front of macroeconomic data, the only factor that could increase their appetite for risk would be the attractive equity valuations. However, this is not an existing factor. Today, the securities in the S&P 500 index show a P/E (price to estimated earnings) ratio of 14.5%. Therefore the shares can not be considered cheap.

The future based on this data is not pleasant. Most investors “forecast” extremely poor yields in the U.S. stock market while many share analysts are expecting a medium term drop even by 30% where the S&P 500 will return back near to the 800 points mark.

Expanding the rally of the last two days, the contract price of gasoline (RBOB) of November delivery increased by 1.43 cents or 0.7% at $2.1655 per gallon, which is a two months high level. Trading volume was decreased because of Columbus Day in the U.S. and holidays in Canada and Japan.

OPEC most likely will maintain the oil production rate at the meeting of its members this week as there are not any signs of recovery in demand in the advanced economies of the world. The oil minister of the United Arab Emirates, Mohammed al-Hamli, spoke of a possible “oversupply” in the market at October 9th, while Qatar’s Oil Minister Abdullah al-Attiyah has recently expressed his estimations that there will be no changes in production. The demand in the U.S., the biggest consumer of oil in the world, fell by 6.4% to 18.5 million barrels per day, according to data from the U.S. Energy Department.

Further deterioration of Ireland could lead to even bigger rise in borrowing costs it would make it more difficult for the government to repay its debt without seeking help from the European Fund for Financial Stability.

However, Moody’s still believes that it is likely that Ireland will be able to control the lending, noting that even with increased spreads the country can stabilize its debt, although the possibility for additional efforts is likely. A downgrade from Moody’s at one level will bring the country’s credit rating at the same level as those given by the Fitch and Standard & Poor’s.

In August, the S&P downgraded its assessment of the Ireland -AA. On the other hand, the policy makers of the Eurozone continue to exert pressure on Dublin to raise the low tax rates for businesses. At the same time, Moody’s upgraded to “positive” from “stable” the outlook for the credit situation of the Turkey’s credit ratings regarding foreign and domestic currency, citing improved economic performance and financial strength, a move that strengthened the Turkish bonds and the Turkish lira(pound). Analysts also say that Moody’s will revise upwards its forecast for the Turkish development in 2010.

Even the Federal Reserved’s decision to support by issuing additional measures for the economic recovery, instead of stop the decline in yields it could reinforce it. The interest rate on U.S. Treasury bonds for ten-year duration, which had reached almost to 4% in April, dropped to 2.60%. According to the Wall Street Journal, the day the Fed announced that it will offer some relaxation measures; yields on ten-year bonds have fallen by 0.22%.

This is because the support to the economy from central bank will be in the form of government bonds. The larger volume of bonds purchased by the Fed the more intense is likely to be the pressure on government bonds yields. However, if the investors had confidence in the prospects for recovery and the course of consumer prices the yields will not had fallen. So far, inflation remains in positive sign but at extremely low levels (0.9 %).

If the estimations for further increase in unemployment over the coming months confirmed, then this will lead the inflation rate to fall further as consumers will limit their spending to what is absolutely necessary. Both the Treasury and the Fed seem to recognize the danger of deflation, however, they haven’t convinced yet that they can apply the right measures in order to reverse the tendency of the markets.

It should however be noted that a number of analysts believes that the concerns about excessive deflation are overvalued. Consumer spending, although under pressure, remains at levels much better than Japan, where consumer price index is negative. Furthermore, the yields of Japanese government bonds of ten-year duration are now below 1%, lower by 150 base points than the American government bonds.

While we may have learned a few lessons from the food crisis of 2008, little has been done to prevent future crises, as Mr. Joachim von Braun (head of the Research and Development Center of Bonn University) noted in an article in the “Financial Times”.

Shaping the price of food in markets is a three dimensional factor: expectations for future supply and demand, the role of speculators in commodity markets and the importance of good values for the political stability in countries such as Egypt. Today, countries with low income are more vulnerable than ever, even more than the recent food crisis of 2008.

The previous food crisis was triggered partly to the fact that the agricultural sector in developing countries had long been neglected, while in developed countries the subsidy policy was active. However, the adverse weather conditions triggered the food crisis, which was escalated from the mishandling of the exports embargo and the creation of supply stocks of importing countries as well as lack of regulatory framework for commodities trade.

“The food crisis is not affecting so much the rich countries. But for the poor it raises issues regarding basic nutrition and long-term health effects. The number of undernourished has increased due to the economic downturn. And the poor no longer accept stoically the extreme prices of basic foodstuffs, as shown in the 2008 crisis”, Mr. von Braun stated. Better regulation of markets, in order to avoid intense actions, should be accompanied by an increase of investments in agriculture. Spending on research and development for the agricultural sector are the most efficient investment to promote growth and reduce poverty.

The question that arises is whether domestic banking will be affected from this game. There is no doubt that Greek banks are healthy. They managed to stay intact during the crisis in the global banking system to avoid any exposure to ‘toxic ‘ financial products. Furthermore, they have made moves to adjustments, restructurings and expansions within and outside Greece.

The U.S. currency rose 0.3% against the Malaysian ringgit at 3.3275. The Australian dollar fell 0.4% to 1.2978 against the New Zealand dollar and 0.5% against the yen, reaching 82.42. Today the Federal Reserve will announce its decision on interest rates, which according to forecasts by analysts will be maintained at low levels near zero. The euro traded near the lowest levels of 16 months against the Swiss franc before the announcement of Germany on investor confidence, which probably fell for the sixth month; a strong sign that Europe’s largest economy struggles to recover. The euro touched 1.4519 per Swiss franc from 1.4524 yesterday.

The global economy has been hit by the biggest lightning it has ever experienced since the Second World War and the top exporters saw their record sales drop by 20% to 30% in 2009 which reflected that the global GDP, according to the World Bank declined by 2.2%. The decline was mainly driven by the deep recession which slipped major developed economies, with result a shrinking GDP by 3% in the USA and 5% and 6% in Japan and Germany respectively.

With the U.S. and major European economies suffering; Asia’s exports registered a sharp decline last year in result of the chained reaction. Chinese exports fell more than 20% in early 2009 and actually started to recover in December. At a worldwide level export revenues fell last year by 16% according to the Oxford Analytica, bases upon figures published by Forbes.

Nevrtheless during all this chaos China proved to be bullet proof as its GDP grew by about 7% in the last quarter of 2008, by 7.9% in the second quarter of 2009 and by 9.1% in the third quarter of 2009 not to mention that it still presents double-digit growth, which seems to satisfy the markets.

Oxford Analytica analysts however, stress that the accelerated pace of China should be a concern rather than a relief. The 585 billion dollars spent in the economy by the Chinese government has not only translated into GDP growth, but also to increased lending by 30% in 2009 which might be worrying as a substantial strengthening of the country’s exports, which would allow the government to withdraw all emergency measures.

Therefore China does not support the worldwide economy but on the contrary it relies its future on the global recovery and its well being cannot be predicted accurately as in reality it relies heavily upon the growth and health of both the US and the major economies of Europe.