Geopolitical concerns keep commodity prices volatile

This week has been dominated by speculation about whether OPEC will extend its output cuts at its next semi-annual meeting at the end of May. Even though an extension now appears likely, this failed to support the oil price, which has slipped back. A strong showing for centrist liberal reformer Emmanuel Macron in the first round of the French election helped to calm investors’ nerves about the risk of a Le Pen presidency and a possible euro-zone break-up. This put downward pressure on the price of gold. Elsewhere, US GDP growth disappointed in the first quarter, but we expect it to rebound in Q2 as consumer spending picks up. Turning to next week, the weaker-than-expected US GDP figures reinforce our view that the Fed will hold fire at its next FOMC meeting on Wednesday, but we still expect it to hike rates in June. The official (Saturday) and unofficial (Tuesday) China manufacturing PMIs will give an early indication of how activity fared in April. We expect slightly weaker readings. Meanwhile, on Friday, the US employment report will be closely watched for signs of a rebound after the weak March data.