Eating chocolate sweetens commodities fall

There is life after five o'clock in the evening! Finally it's bright enough to drive home without the headlights on. It's amazing how the sudden appearance of daylight after hours gives you a whole new lease of life. Things that had seemed difficult and dreary when driving home in the dark now seem easier and full of promise. I was definitely born to be in a different type of world - one with longer days, shorter nights, warmer weather and an extra day at the weekend.

I desperately need another day at the weekend. Saturday and Sunday just aren't enough to cover my need for sleep and all the other things I have to do. I had planned an early morning rise on Saturday because there are loads of things that I've been putting on the long finger, but come Saturday morning it was eleven o'clock before my eyes flickered open. I didn't even wake up at six and at eight like I normally do. And although I kept telling myself that I obviously needed the sleep, I was rushing around like a mad thing all day afterwards.

It makes me all the more in awe of my friends who work and have children. At least there wasn't a small kid trying to wake me up at the crack of dawn. I don't know how the G7 finance ministers felt on Saturday morning. Their weekend meeting near Bonn covered the predictable topics of currency management and economic crises but whether or not anything really worthwhile comes of it is anyone's guess.

Robert Rubin, the US Treasury Secretary, said that there had been a very frank discussion about currency target zones. Any very frank discussions I've been involved in have usually resulted in people yelling at each other (although I'm not usually in favour of the yelling approach myself). Actually it's hard to imagine the urbane Hans Tietmeyer yelling at anyone but I guess he could if he had to.

Anyway, Mr Tietmeyer was the proposer of the "financial stability forum" which is a body designed to ensure that individual supervisory bodies promote international financial stability, the functioning of the markets and reduce systemic risk. (I've paraphrased that for you, otherwise we'd be here all day.) So the members of the forum will meet a couple of times a year, have a small secretariat in Basle and generally keep an eye out for countries whose economies are about to go down the toilet. Once again, you can't help feeling that stable doors are being closed somewhat late in the day, but perhaps they'll be in time to stop the next disaster.

Meanwhile, Oskar Lafontaine, the German Finance Minister, got no takers for his currency target zone ideas. This is the more likely discussion where a full and frank exchange of views was aired because although narrow trading bands would be the preferred option for everyone it's not something that can easily be forced on the markets.

You can just see the scenario - the finance ministers agree trading limits and the markets immediately take the currencies to the outer edges of those limits. It's like telling your child not to touch a hot flame - they'll have a go anyway.

In the meantime, though, there are some concerns about the fledgling euro which has consistently traded lower since the January launch. While Wim Duisenberg says he's "not concerned" he can hardly be amused to have seen the currency below 1.10 against the US dollar on Monday morning.

The market still believes that the sluggish growth in the euro zone will be enough to see another rate cut this quarter. The European Commission has talked about scaling back its 2.6 per cent growth forecasts for the region. Mr Tietmeyer - who must enjoy hitting the headlines again after taking so much of a back-seat post euro - doesn't think that the currency is "overvalued" which is as good a lesson in semantics as you'll ever get.

The Japanese, though, are quite content to see the yen slide against the dollar. With economic recovery of Japan right up there on the G7 agenda, nobody was trying to talk the yen higher. And, with overnight rates still firmly at 0.15 per cent, talking it higher would be a difficult job. Obviously the plan is to try and stimulate the economy by making exports competitive, but falling prices worldwide don't exactly make the task any easier.

Although it's hard to believe, commodity prices fell to a 12-year low this month. The CRB index was at its lowest level since April 1986, and the Goldman Sachs Commodity Index, which is weighted towards energy prices, is at its lowest since December 1977. Crude oil is now trading around $13 (€11.79) a barrel which is about 23 per cent down on the year and compares to nearly $27 a barrel last year.

It's all a far cry from the 1970s when you had to queue for petrol and leaving the light on when you'd left a room was almost an indictable offence. Back in 1973, Iranian oil was $1.85 a barrel but, following the oil embargo, prices went to $11.65. The most recent oil price crisis was back in 1979 when prices reached a high of $30 a barrel. With oil production more evenly spread throughout the globe, most commentators would agree that that kind of crisis can't happen again.

But there's always something that can drive economies into a complete panic. Though it's not copper - as there's a record stockpile of copper at the moment. Prices here are also at 12-year lows, having fallen by about 40 per cent in the last year and a half. Warehouse inventories have more than doubled since September while consumption has decreased.

Silver is another faller - prices are down about 15 per cent since last year. And, despite a poor cotton harvest in the US, prices are still 9 per cent lower than last year.

Even that great comforter, chocolate, has come under the cosh. Swiss chocolate sales fell by 1.9 per cent last year due to a fall in demand in Asia.

However, most commentators seem to think that the slack will be taken up by US consumers. I do too. And not just US consumers. In a time of volatile markets, hectic schedules and difficult trades, there's nothing better than a bar of chocolate to offer solace and comfort to all. They shouldn't be eating less of it in Japan, they should be eating more. When I finally ran out of time to do all the things I wanted at the weekend, I bowed to the inevitable and settled down with a bar of Cadbury's Cookies & Cream. What more could anyone ask for?

Sheila O'Flanagan is a fixed-income specialist at NCB Stockbrokers