Relative calm after the storm

Last week’s negative sentiment towards commodities spilled over into this week as the prices of most commodities fell further, albeit to a lesser extent. Even the upward revision to US GDP in Q1 and the first release of stronger numbers for Q2 did little to raise spirits. However, our view remains that the market has already swung too far towards pessimism, particularly over the prospects for (Chinese) demand. Indeed, in many cases the recent falls in prices may actually accelerate demand and supply responses. The oil industry is already bracing itself for further job losses, while South Africa’s mining industry is set to lose more workers too.