Much too soon to call a recovery

Although the prices of most industrial commodities rose this week, we think that a sustained and broad-based recovery is still some way away. A trio of factors were responsible for this week’s rise: news that US-China trade talks will resume in October; data which suggested that the US economy is holding up; and the announcement of increased stimulus measures in China. Despite this week’s relative optimism, we think global growth is set to remain soft in the remainder of 2019 and that the US-China trade war will escalate further, which underpins our generally bearish view on industrial commodity prices. Turning to next week, Chinese trade data for August are likely to show that the weakness in import growth has deepened. Meanwhile, we expect euro-zone industrial production data for July to point to a slow start to Q3. In both cases, we expect industrial commodities to pare some of this week’s price gains. Otherwise, OPEC will publish its Monthly Oil Market Report which, similar to the August report, will probably give little indication that OPEC is on the cusp of taking larger action to support oil prices.