The close of China’s National People’s Congress (NPC) yesterday brought with it little in the way of additional news, leaving the huge fiscal stimulus announced last Friday – which was unambiguously positive for commodities demand – eclipsed by the decision this week to impose national security legislation on Hong Kong. In turn, the latter has led to a rekindling of US-China tensions. The possibility of a significant re-escalation in conflict between the two nations clearly presents a downside risk to our year-end price forecasts, particularly for agricultural commodities. Next week, a raft of PMI surveys for May are set to be released. Prices are likely to take direction primarily from China’s PMIs, which we expect to point to a gradual pick-up in activity and concomitant rise in commodities demand. Meanwhile, markets will continue to pay close attention to further developments in the US-China saga.
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