The recent rally in most commodity prices stalled this week at least in part due to concerns about the scale of virus infections, particularly in the US. A stronger US dollar, falls in US equity prices and some profit-taking added to the downward pressure on commodity prices. We have always argued that while demand will inevitably bounce back as lockdowns are lifted, the return to pre-virus consumption patterns will take longer as consumers remain cautious. Accordingly, some of the jumps in commodity prices in recent weeks, including oil, may have been a little premature. Looking ahead, the markets’ focus will remain on the progression of the virus and on the scale of policy support. As the first large economy to start relaxing virus-related restrictions, China’s activity and retail sales data for May (released on Monday) will be closely watched. We suspect that there was a surge in construction activity, but a slower rebound in the manufacturing sector.
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