Commodity prices held up well this week, despite the hawkish tone of the Federal Reserve and continued worries over a messy default by Evergrande, the Chinese property developer. Notably, European natural gas and Asian LNG prices continued to climb, powered by ongoing supply disruptions and unseasonably strong demand. Oil prices also made gains amid concerns that OPEC members are struggling to hit collective production targets which, if sustained, poses an upside risk to oil prices.
Looking towards next week, Chinese PMI data are scheduled for release on Thursday/Friday. We expect a continued loss of momentum in industrial activity, which would be negative for commodity prices, especially industrial metals. Investors will also be closely watching developments around Evergrande. We expect a managed restructuring of the company, which should limit the negative impact on China’s metals demand.
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