EUROPEAN COMMODITIES UPDATE: Commodities clipped as the USD regains poise and recessionary concerns mount

Analysis details (10:40)

• The crude benchmarks have kicked the week off on the back foot, as initial modest upside in APAC trade gave way amid reports that China tightened COVID restrictions in a district of the manufacturing-hub Guangzhou.


• Currently, WTI and Brent are pressured by just shy of 2% or USD 2.00/bbl at worst; though, this still leaves WTI with upside of around USD 2.00/bbl for the month and as such around USD 10/bbl above the 2022 low at USD 74.27/bbl.


• Guangzhou aside, there are numerous other factors for the complex to digest including the CCP Congress reappointing China’s Xi for a third term alongside a rejigging of its top brass, alterations which ING believe increases the odds of continuity, given Xi now has even more influence on the economy. Elsewhere, the region’s delayed data was constructive but ultimately had fleeting impact. Most recently, the USD has continued to pick up, perhaps in a paring of Friday’s Fed-related dovish price action; though, the DXY remains shy of Friday’s 112.93 open. Amidst this renewed upside came the morning’s flash PMIs for the EZ and the UK, metrics which were below expectations across the board with the exception of the EZ’s Services print (in-line vs exp., fell vs prev.). Releases which modestly added to the pressure in the commodity space and equities by extension, particularly as the accompanying commentary continues to point to a recession which could accelerate towards end-2022.


• Given the recessionary headwinds and the USD’s pickup, both precious and base metals are broadly speaking under pressure; currently, Gold is hampered by circa. USD 10/oz and has been pushed back below the 10-DMA at USD 1650/oz. Elsewhere, base metals are downbeat despite APAC data given the COVID-related update for Guangzhou and on the mentioned USD action.


• For the session ahead, focus is very much on the US Flash PMIs for any fresh insight into the Fed potentially slowing the pace of its tightening in the meetings ahead and whether the recessionary/inflationary backdrop is as bleak as indicated by the EZ & UK surveys.

24 Oct 2022 - 10:40- Research Sheet- Source: Newsquawk