Risks building in China, Venezuela in crisis

The relief rally in Chinese equities prompted by additional policy stimulus has turned global sentiment around, but a sustained recovery in commodity prices will probably require hard evidence that the Chinese economy is picking up again. Fortunately, that is exactly what we expect to happen. What’s more, even though we continue to think that the Fed will press ahead with a first rate hike soon, the gradual return of US interest rates towards more normal (but still low) levels would clearly be much less of a threat to global commodity prices than a “hard landing” in China.