China to continue offsetting weakness elsewhere

Commodity markets shrugged off the uncertainty surrounding the US election and took direction from equity markets and the US dollar this week. Most commodity prices rose as equities jumped and the dollar weakened. However, the likelihood of a President with only limited scope to legislate suggests that a large stimulus package and infrastructure spending in the US are now off the cards, which should be a negative for energy and metals prices. That said, China remains the key player in most industrial commodities markets and the news there is more encouraging. October’s trade data, due for release tomorrow, may show lower commodity imports m/m, but this was from a high base and all the signs are that demand is still growing robustly. Admittedly, we expect oil prices to remain low for the remainder of this year as heightened virus-containment measures in Europe weigh on already-subdued demand. But while we expect European crude demand to dip in the fourth quarter, the impact is likely to be much less severe than during the national lockdowns earlier in the year.