All the signs point to weaker demand

After a relatively quiet week, the prices of most commodities took a tumble on Friday afternoon following the release of weak US February employment data. A rise of just 20,000 in non-farm payrolls, combined with poor Chinese February trade data and a dovish ECB statement yesterday, sparked renewed concerns about global economic activity. Indeed, our forecast of slower global GDP growth is a key factor underpinning our bearish commodity price projections. What’s more, China’s leadership announced only modest stimulus at this week’s National People’s Congress. Policymakers appear caught between a desire to support growth and concerns about financial risks. Next week, China is set to publish activity and spending data for the first two months of the year, which should give us a better indication of the state of the economy. We expect the data to be soft, suggesting that the prices of commodities, and industrial metals in particular, could fall further.