China to save the day!

Despite further signs of strength in China’s manufacturing sector, the prices of most industrial commodities – as well as gold and silver – fell this week owing in large part to an appreciation of the US dollar. However, the ongoing fiscal stimulus in China will bolster economic activity and demand for commodities over the remainder of this year, which we think will give a renewed lift to metals prices. Next week, it is fairly quiet on the data front apart from China’s August trade figures on Monday. Nevertheless, investors’ attention will probably be focused on virus infection numbers and whether or not more countries will be forced to re-introduce quarantine measures. However, if they are re-imposed, we suspect that they would be at a local (rather than national) level. As a result, the negative impact on commodity demand and prices is likely to be small.