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Yesterday’s announcement by President Trump that a 10% tariff is to be levied on $300bn worth of Chinese goods came as a shock after reports of “constructive” trade talks between the US and China earlier in the week. While rising protectionism has …
2nd August 2019
Commodity prices plummeted yesterday in a knee-jerk reaction to the news of more US tariffs on Chinese goods. We have argued for some time that the US-China trade war was likely to escalate, and it has been a reason why we have been particularly bearish …
China’s official and unofficial PMIs both rose in July, but they remain consistent with a renewed slowdown in economic activity, which will be a key factor weighing on commodity prices later this year . The official manufacturing PMI ticked up to 49.7 …
1st August 2019
Overview – With the exception of the precious metals, most commodity prices drifted lower in July on concerns about soft demand. Given our forecast of slower global economic growth in the second half of this year, we expect the prices of most energy and …
31st July 2019
Commodity prices have largely been treading water, ahead of some major events next week . The Fed will announce its interest rate decision on Wednesday. A 25 basis points rate cut is already priced into financial markets, but anything more could prompt a …
26th July 2019
We think that the price of palm oil (PO) will rise a touch this year and pick up strongly in 2020 primarily on the back of stronger demand growth, which will shift the market into a deficit . By way of background, the price of PO has tumbled since the …
25th July 2019
The latest rally in the Baltic Dry Index (BDI) has more to do with developments in the iron ore market than trends in world trade. As such, we think that the index will fall back as the iron ore trade normalises and the reality of slower global growth and …
24th July 2019
Overview – Subdued economic growth will weigh on the prices of most industrial and energy commodities for the remainder of 2019. What’s more, our view that there will be a further escalation in the US-China trade war could have particularly negative …
19th July 2019
We now expect the Fed to start cutting interest rates at the end of this month . However, we only expect a quarter-point reduction in July and only one further cut this year. While lower US interest rates are typically good news for all commodities, there …
Fed Chair Jerome Powell’s confirmation earlier this week that an interest rate cut is likely in July gave most commodity prices a lift . And oil prices rose to their highest level since May following a sharp decline in US crude stocks, rising geopolitical …
12th July 2019
China’s trade data for June painted a fairly downbeat picture of its demand for commodities. Given that we expect the Chinese economy to slow further over the coming months, a pick-up in China’s commodities imports looks unlikely . Continuing a run of …
A sharp drop in mortgage rates has boosted activity in the US housing market However, the outlook for lumber-intensive housing starts is not all that bright The latest rally in US lumber prices is therefore likely to unwind After falling sharply over the …
Despite a swathe of news that should have been positive, commodity prices struggled to make gains this week as concerns about global growth continue to weigh on sentiment . Even the strong US employment data on Friday failed to lift the mood, although it …
5th July 2019
Overview – While June was a relatively positive month for commodity prices, we think that a combination of slower global growth and waning risk appetite will lead to lower prices for energy and industrial metals later in the year. Energy – Oil prices …
3rd July 2019
In theory, last weekend’s trade truce between the US and China is a positive for commodity prices . But the muted market reaction suggests some scepticism. We tend to agree. In fact, we suspect that any boost to demand will only be temporary, and that …
1st July 2019
Another month of weak PMI readings confirms a renewed slowdown in China’s economy. While optimism surrounding the US-China trade truce is currently buoying commodity prices, we think slower growth in Chinese demand will be a factor dragging prices lower …
Commodity markets have been relatively quiet ahead of the G20 meeting (this weekend) and OPEC meetings (Monday and Tuesday) . Investors are optimistic that a truce on trade will be agreed when President Trump meets President Xi at the G20. As such, if …
28th June 2019
Concerns about a shortfall in global oil supply have resurfaced as a result of the escalation in geopolitical tensions surrounding Iran. But we think there are four key reasons why the risk to supply is less now than back in 2011, when hostility between …
25th June 2019
Having surged this week, the price of oil could rise further in the near term if tensions between Iran and the US continue to escalate. At the same time, the price of gold is benefitting from an increase in safe-haven demand and a weaker US dollar. The …
21st June 2019
We no longer expect the US and China to strike a deal on trade, and now forecast that the two countries’ dispute will escalate further. In this Commodities Watch, we lay out what our new view on trade means for our commodity price forecasts. … What our …
17th June 2019
Markets appear to have come round to our long-held view that slower economic activity this year will weigh on the prices of most energy and industrial commodities. Not even an attack on oil tankers close to the Strait of Hormuz was enough to prevent a …
14th June 2019
At first glance, the USDA’s latest set of projections appear bullish for the price of corn. However, we think that much of this is already priced in and as such we are not changing our corn price forecast. … A poor harvest unlikely to boost corn prices …
12th June 2019
We have now incorporated an escalation in the US-China trade war into our global economic forecasts. As it happens, we think that the negative impact on global GDP growth will be relatively contained, so it has not led to a major downward revision to our …
10th June 2019
China’s commodity import volumes were subdued last month, which is consistent with our view of soft Chinese domestic demand and downward pressure on commodity prices. Moreover, while there was no apparent impact from higher US tariffs in May, they could …
Driven in large part by investors pricing in a greater degree of interest rate cuts in the US, the gold price leapt to its highest level in over a year this week. That same anticipation of policy support probably also explains the sharp recovery in the …
7th June 2019
After plunging in May, we expect the prices of most energy and industrial commodities to remain subdued in 2019 on the back of slower global growth and a rise in investor risk aversion. Grains may be an exception to this downbeat outlook given the recent …
4th June 2019
Subdued survey data suggest that China’s economy is likely to soften this quarter, which underpins our generally bearish view on industrial commodities prices in the coming months. … China’s commodities demand looks …
3rd June 2019
Trade was the big theme this week once again, with China suggesting it could restrict exports of rare earth elements to the US, as well as a rise in US-Mexico trade tensions. Consequently, the prices of oil and other industrial commodities fell, while the …
31st May 2019
The Trump administration’s latest farm aid package, announced on 23rd May, should provide some short-term relief to the ailing US farming sector. But direct payments to farmers could exacerbate the oversupply of soybeans in particular and act as a further …
30th May 2019
Weak flash PMIs in major advanced economies, especially in the US, have led to increased worries about the demand for industrial commodities. As a result, the recent softness in industrial metal prices has now spread to oil. Yesterday, the price of Brent …
24th May 2019
Investor positioning in the futures markets for both metals and agriculturals has taken a downward turn recently. While the picture is not uniform across commodities, we think that investor selling will further weigh on the futures prices of these …
23rd May 2019
Softer April activity and spending data out of China and negative sentiment surrounding the impasse in US-China trade talks weighed on the prices of many metals this week. We had always suspected that the stronger Chinese data in March had been driven by …
17th May 2019
Coffee prices recently reached their lowest levels in around a decade. That said, we suspect that prices are bottoming out and should pick up slightly by the end of this year. But looking beyond 2019, productivity gains and burgeoning output in newer …
14th May 2019
Persistently high production and stocks have led us to revise down our price forecast for wheat. Indeed, in its first estimate of the 2019/20 season, the USDA expects the market to be in a large surplus. … Oversupply plagues the wheat …
President Trump’s decision to ratchet up the pressure on China by raising trade tariffs weighed heavily on most commodity prices this week. However, market sentiment improved a little on Friday as it became clear that goods already in transit (as of the …
10th May 2019
Aside from oil, China’s commodity imports have generally been soft since the start of this year and there are now signs that export volumes are starting to come off the boil. Imports may pick up later in the year as policy stimulus feeds through into the …
8th May 2019
The risk of an escalation in the tariff war between the US and China has negative implications for our already subdued outlook for the global economy and commodity prices this year. … “No trade deal” back on the …
7th May 2019
Weaker-than-expected Chinese manufacturing surveys and a fairly hawkish statement from the Fed sent the prices of most commodities lower again this week. Industrial commodities prices were also hit hard by preliminary data from the US showing the lowest …
3rd May 2019
The prices of oil and iron ore made further gains in April owing to continued supply-side concerns, but the prices of most other commodities fell. Indeed, we also expect iron ore and oil prices to drop back in the months ahead as slower global economic …
2nd May 2019
The April survey data suggest China’s economy has entered a softer patch and underpin our view that most industrial and oil prices will ease back in the coming months. … China’s PMIs point to subdued commodities …
30th April 2019
The prices of commodities mostly fell this week, despite Friday’s data showing stronger-than-expected Q1 growth in the US. Even oil prices ended this week lower. Having initially jumped when the US government announced its decision to remove waivers from …
26th April 2019
We have long expected that sluggish global demand will weigh on commodity prices in 2019. That said, recent indicators have led some to suggest that global growth may be bottoming out. But we disagree, and maintain that prolonged economic weakness will …
We retain our long-held view that the price of oil will fall this year owing to weak global growth, further gains in US oil output and a rise in investor risk aversion. However, the scale of recent supply disruption has been greater than we anticipated. …
23rd April 2019
The stronger-than-expected economic activity data released this week by China failed to boost commodity markets. Part of the reason is probably that some of the good news had already been priced in. And in some cases, market-specific headwinds have …
18th April 2019
We think that the prices of most commodities will fall this year as global economic growth remains weak and investor risk aversion returns. While policy in China has become more accommodative, it is on a limited scale and is only likely to stabilise …
17th April 2019
It has been a relatively quiet week in most commodity markets, except for energy. Oil prices rose again, to over $70 per barrel for Brent, on news of military operations in Libya. However, we think at this stage much of the bad news on supply is now …
12th April 2019
China’s commodity imports were generally weak in the first quarter of 2019, mirroring the slowdown in the wider economy. In contrast, commodity exports surged. We suspect that imports will remain subdued in the coming months, at least until recent policy …
All the signs are that US-China trade talks are progressing well. On Friday, there were even media reports that the two sides had agreed timelines for implementing a deal. Given the good news on trade, some more upbeat economic data and the apparent …
5th April 2019
Back in 2014, we examined explanations for the unusually high correlation seen between commodity and equity price moves during 2009-12. We concluded that while ultra-loose policy played a role, the correlation was also attributable to the increased …
3rd April 2019
The prices of most commodities struggled to find direction in March, although oil made some further gains. If a US-China trade deal is signed in April, prices may revive but we suspect that any rally will prove short-lived and that prices will fall back …
1st April 2019