It has been an unusually quiet week for commodities, with less volatility than we have come to expect. The war in Ukraine continues to provide possible stresses for supply but, for now at least, it seems the market focus is shifting to demand as well, particularly in Europe and China.
European PMIs released this week showed a sharp downturn in manufacturing, driven by weak output in the German automotive sector. Europe has been one of the most affected regions by the rise in energy prices, even before the Russian invasion of Ukraine, and we expect this to limit economic growth in 2022. This, in turn, will weigh on regional commodity demand in the year ahead.
Looking to next week, the results of the French presidential elections will be one of the main talking points. A win for incumbent President Macron looks likely judging from the polls, and we think he would be more supportive of an EU embargo of Russian oil than Marine Le Pen.
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