Trade talk optimism could prove misguided

With little in the way of major economic data releases this week, most commodity prices rose on the back of news that the US and China may agree a “mini deal” as part of ongoing trade talks. This could reduce the immediate risk of a further rise in tariffs. That said, we have been here many times before. And with the key structural issues no closer to being resolved, we think it is only a matter of time before tensions reignite. Consequently, with global growth likely to get worse before it gets better, we suspect that a sustained and broad-based recovery in industrial commodity prices is still some way away. Turning to next week, Chinese trade data for September will be released on Monday. We anticipate that commodities import growth may have edged up in line with the uptick in domestic demand implied by the PMI data. Meanwhile, industrial production data for the euro-zone (Monday) and the US (Thursday) are both likely to chime with the ongoing weakness in global manufacturing and put downward pressure on industrial commodity prices.