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What's going on?
AP Moller-Maersk is the worlds largest container shipping company and also has an oil business. Struggles in both those industries led to it losing $2.5 billion in the 4th quarter last year. Its stock fell almost 4% on Wednesday its fallen almost 50% in the past year.
What does this mean?
As its the worlds biggest shipper, Maersk is often used as a proxy for global trade. And the volume of goods traded between countries was disappointing (albeit it didntdecline): Maersk estimated that global trade grew just 0-1% last year as economic growth slowed. Prior to the financial crisis in 2008, growth was routinely more than 10% per year.
Maersks big loss in the 4th quarter was driven mainly by it having to say that some of its oil assets are worth less due to the sharp decline in the oil price.
Why should I care?
For the market: Lots of industries are suffering a hangover from the days of high global growth. Much more oil used to be required so a whole new way of drilling for it (fracking) was developed. Global trade used to be booming so tons of ships were built. Now that economic growth is slowing down and the price of oil has dropped, those companies who ramped up during times of growth are paying the price.
Bigger picture: Maersk expects global trade to pick up slightly in 2016. It is forecasting 1-3% growth for global trade this year. While that might be somewhat optimistic, the good news is that it doesnt look like trade is falling off a cliff. And that might be true of global economic growth as well: its slowing but its not collapsing.
Originally posted as part of the Finimize daily email.
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