www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.PlayvideowithPaulBloxhamandGordonGrayBy:PaulBloxhamandteamMarch2019GlobalEconomics/EquitiesGlobalCommoditiesAfterarollercoasterrideMuchlikeotherassetclasses,commoditypricesrodearollercoasteroverthepastsixmonthsPriceshavesteadiedrecently,anddespiteslowerglobalgrowth,weexpectthemtotrendhigherin2019and2020Tightsupplyandenvironmentalpolicyarestillkeythemesunderpinningtheglobalcommoditypricesoutlook1Economics/Equities●GlobalMarch20191)JustlikearollercoasterrideCommoditypriceshaveriddenarollercoaster,muchashasbeenthecaseforotherassetclasses,includingequities,bondsandcreditinthepastsixmonths.Slowingglobalgrowth,tighterfinancialconditionsandtradepolicyuncertaintyallplayedarole.Butsupplysidedevelopmentswereimportanttoo,particularlyforoil.Commoditypriceshaverisenmodestlythisyeartodate,astheFederalReservehasbeenmoredovish,Chineseauthoritiesareprovidingmorestimulus,tradepolicytensionshaveeasedandOPECisconstrainingitsoilsupply.2)Weexpectpricestotrendhigher,despiteslowerglobalgrowthFormanycommoditiesthekeysupplysidethemesremainthesame.Formetals,yearsoflowinvestment,followinga‘super-cycle’earlierinthecentury,meansthatsupplyistight.Foroil,OPECproducersareseekingoilpricesofaroundUSD70abarreltomeettheirfiscalbreak-evens,butnimbleUSshaleproducerscandelivernewsupplywhenpricesclimb.Overall,thekeydifferenceisthatglobalgrowthhasweakened,andtradetensionsremainathreattodemand.Weexpectglobalcommoditypricestobe9%lowerin2019(onaverage)thanthepreviousyear,reflectingthedropseeninlate2018,andforthemtoriseby9%in2020.3)China’sgrowthisexpectedtobesupportedbypolicystimulusAtthesametime,ouroutlookforChina’sgrowth,whichmattersthemostforthebulkofcommodities,isquitepositive.Chinesepolicymakershavebeenpullingforwardinfrastructureprojects,particularlysubwaysystems,looseningmonetarypolicyanddeliveringtaxcuts.HSBC’sChinaeconomist...
