TORONTO, Sept. 4, 2018 /CNW/ - Scotiabank's Commodity
Price Index fell by 0.7% m/m in July mainly on weakness in the
metals sub-index stemming from trade-related macro
skittishness.
Further tariffs and the subsequent hit to Chinese manufacturing
activity (chart 1), uncertainty regarding Beijing's policy balance between deleveraging
and stimulus, emerging market financial stress, as well as a
material boost to the US dollar have all conspired to put a brake
on the gains made by commodities over the past two and a half
years. Base metal prices—down by more than a fifth since
mid-June—continue to absorb the brunt of the headwinds, but oil's
march forward also appears to be slowing on demand concerns and
gold is trading below $1200/oz for
the first time since late-2017 on a stronger greenback. While there
are nascent signs that materials-intensive activity is slowing, the
global economy remains strong and economic growth broad based.
"We expect that fears will subside through summer's end as
progress is made on the trade file and that additional Chinese
stimulus will help lift prices back to where most were back in
early June," wrote Rory Johnston,
Scotiabank Commodity Economist, in the Report.
Other highlights of the August 31
Report include:
- Much of recent commodity price weakness is due to
speculative that trade war stresses will derail global economic
momentum, meaning that future retracements are likely to be abrupt
as positions are covered.
- Zinc prices continue to fall back from multi-year highs
reached in the first quarter.
- Federal Court of Appeals quashes Trans Mountain Pipeline
Expansion approvals, darkening the outlook for Western Canadian
market access.
Scotiabank Economics provides in-depth commentary on economic,
financial market, and policy developments, both domestically and
internationally.
Read the full August 2018
Scotiabank Commodity Price Index online here.
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SOURCE Scotiabank