After rising sharply for much of this year, the Lunar New Year holiday in China meant that commodity prices generally took a bit of a pause this week. The only exceptions were natural gas prices, which continued to plunge, owing to lower-than-normal demand, high stocks and supply dislocations in the US.
Attention is likely to focus on the macro drivers of commodity prices next week, particularly in China and the US. In the former, the official and Caixin PMIs released throughout the week will show the first signs of the reopening boost to China’s economy. In the latter, we think the Fed could combine a 25bp hike at its Wednesday meeting with hawkish forward guidance. And, on Friday, we expect non-farm payrolls figures to reveal a sharp slowdown in employment growth.
With the US heading for a recession and China’s reopening boost only getting started, the differing trajectories of the world’s two largest economies is just getting underway, which provides a confusing backdrop for commodity prices. We ultimately think the recent rallies in many commodities may wobble over the next few months, before finding more stable footing once the US economy picks
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