China only off-the-radar for now

The war in Ukraine continued to dominate headlines, and commodity price movements, this week as peace talks fell apart and sent energy prices up sharply. However, at the same time, there are further worrying signs of a downturn in China’s commodities demand. Trade data from China, released yesterday, suggested that the latest virus restrictions weighed heavily on commodity demand in March. We assume that some modest policy easing in China will at least put a floor under commodities demand this year. Admittedly, the scale of COVID-19 related disruption to activity may yet prompt a more aggressive fiscal stimulus, but there are reasons to be hopeful that disruptions may soon start to ease. Sentiment surrounding the war in Ukraine will probably continue to keep commodity prices high for some time yet, but Chinese activity and spending data for March, due on Monday, could take some steam out of markets. We think that the data will be weaker than the consensus expects as lockdowns weighed on activity in areas undergoing outbreaks. We are sending this Weekly one day earlier than usual because our offices are closed for Good Friday on Friday, 15th April.