Some signs of the dust settling

The fall-out from Mr Trump’s threat to levy a 10% tariff on $300bn worth of Chinese imports continued to roil commodity markets this week. The prices of crude oil and most industrial commodities fell, with a particularly sharp drop in the iron ore price in part due to improved supply. Looking ahead, we think that the price of iron ore will decline further on the back of a renewed slowdown in China’s economy and, more specifically, a downturn in China’s construction sector. Any developments in the US-China trade dispute would be a key driver of prices next week. Otherwise, China is scheduled to release its industry and fixed asset investment data for July on Wednesday. We think the data will be somewhat weaker, which will add to concerns about commodities demand and could send prices even lower.