Swift Demand Recovery From China Likely To Trigger Fresh Rallies

August 30, 2021

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fragile economic releases from China, a surge in new virus cases across the world, and a strong US greenback cast doubt on the bullish outlook of industrial commodities
a slowdown in industrial activities prompt investors to reduce their bullish bet on industrial commodities
a stronger US currency is also putting pressure on commodity prices
ongoing choppy trading may continue in near future but a swift demand recovery from China is likely to trigger fresh rallies

A stronger US currency is putting pressure on commodity prices. When US currency strengthens it makes commodity prices more expensive to the holders of non-dollar currencies. Choppy trade may continue in industrial commodities in near future but swift demand recovery from China is likely to trigger fresh rallies says an article on Money control.

China demand woes

Fragile economic releases from China, a surge in new virus cases across the world, and a strong US greenback cast doubt on the bullish outlook of industrial commodities. The recent correction in base metals and energy commodities was primarily due to the China demand woes.

Economic slowdown

Extreme weather and a fresh outbreak of Covid-19 swept across the country made China’s economy slowed more than expected in recent months. Monthly economic numbers like factory activity, retail sales, export, and investment data all showed growth retreating more quickly than expected.

Industrial production numbers

China’s industrial production numbers increased to 6.4 percent in July against a forecast of 7.8 percent. The reading was 8.3 percent in June. Retail sales figures too contracted lower to an increase of 8.5 percent in July against a forecast of 11.5 percent. Economists and research firms had already started lowering their expectations of China’s economic growth.

GDP forecast of China

Large investment banks had reduced their GDP forecast of China to around 8.2 or 8.3 percent from a previous estimate ranging from 8.6-8.9 percent. Few others are set to follow suit due to increasing pessimism about China’s economic outlook. China’s economy grew 12.7 percent during the first half of 2021 against the same period a year earlier.

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Source: Moneycontrol