Fears of a W-shaped recovery to hold back prices

It was another wobbly week in commodity markets as prices generally fell, largely on the back of a deterioration in investor risk appetite. Most equity markets sold off and the US dollar strengthened as a tightening in virus containment measures in Europe reignited fears that the fledgling economic recovery could stall or even go into reverse. If anything, these developments support our view that an uncertain outlook for demand will keep oil prices stuck in a narrow range for the remainder of this year. And while we still expect most industrial metals prices to end the year a little higher, events this week only leave us more convinced that the big gains are behind us. Next week, attention will centre on any further actions taken by policymakers in Europe to deal with the latest rise in new infections. Otherwise, we think that China’s September PMI data (Wednesday/Thursday) will be largely unchanged on the month, providing further evidence that the recovery in commodity demand is starting to run into the buffers.