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Not out of the woods yet

Just as it seemed as though stability had been restored in financial markets, a renewed bout of selling of bank stocks took place in Europe this morning. And there are a number of smaller US banks that are still in difficulty. The nervousness has spread to commodity markets, with the oil price down by almost 2% on the day at the time of writing. We think the sell-off in commodities reflects a combination of a rise in investor risk aversion and more fundamental concerns that the turmoil in the banking sector will weigh on global economic growth and commodity demand.

Commodity prices are likely to remain at the mercy of investor sentiment next week. There are few key data releases, at least from the commodities perspective but, in any case, underlying supply and demand fundamentals will probably take a back seat. 

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