Little festive cheer for commodities

The prices of most commodities, including oil, traded in a narrow range this week, at least until Friday when weak economic data out of China prompted a synchronised fall in prices. We suspect that the lagged impact of slowing credit growth in China will mean that the economy will continue to cool in the coming months, which is a key factor in our bearish outlook for most industrial commodities. Next week could be quiet too, ahead of the holidays. That said, the Fed is set to make a policy announcement on Wednesday. We expect it to raise the Fed Funds rate by 0.25bp, but think that this is now largely priced into markets. If it leaves rates on hold, however, we could see a move up in the price of gold. Meanwhile, China’s Central Economic Work Conference starts on Wednesday. The leadership could signal a greater emphasis on supporting growth next year. However, we think any additional stimulus is only likely to stabilise, rather than boost, growth.