Revising up our metals forecasts as China rebounds

Industrial commodity prices continued to claw back their virus-induced losses this week. These gains helped to extend the general rise in the prices of industrial commodities since late March, notwithstanding some hiccups along the way. The latest economic data suggest that economic activity in China and the US could bounce back strongly, which is a clear positive for commodities demand. In fact, we have revised up our forecasts for the prices of base metals on the back of our more optimistic view on economic growth in China this year and our expectation that the US dollar will weaken further. Next week, market participants will be looking for proof that the stronger-than-expected economic revival seen in the US and China is being mirrored in Europe. To that end, we suspect that the euro-zone flash PMI survey for June (Tuesday) will show a further improvement, albeit from a low level. Otherwise, any signs that the recent localised outbreaks of the virus (such as in Beijing) are morphing into something more serious present the biggest risk to the ongoing pick-up in prices.