Sentiment boosted by further China property measures

Further property support measures amid signs of economic stabilisation in China helped boost sentiment across commodity markets. This was aided by signs of tightness across energy and metals.

Copper led the base metals higher last week as China announced further measures to support the property sector. The People’s Bank of China announced several nation-wide property easing measures in the past couple of weeks, exceeding market expectations. These included a cut to the down-payment ratio for first-home purchases to 20%, an adjustment lower of interest rates for existing mortgages for first-home buyers and broader definition of first-home mortgagors that allows preferential loans. This was followed by data on Friday showing the Caixin factory gauge for August unexpectedly returned to expansionary territory. India is also providing some support with economic growth picking up to 7.8% y/y last quarter, its fastest in 12 months. This will help see copper demand growth nearly double this year compared with the five years prior to the pandemic. Iron ore futures also rallied, despite stockpiles held at Chinese ports pushing higher last week.

Gold gained last week as cooling US jobs data raised expectations the Fed would pause its rate hikes. The USD fell and bond yields retreated on the data, helping boost investor demand for the precious metal.

Crude oil rallied as concerns over higher supply were eased on new OPEC data. Increasingly exports from Iran and Venezuela, who are not a part of the OPEC+ supply agreement, has raised concerns they would negate the impact of cuts from other producers. However, data on Friday showed OPEC’s oil production held broadly steady last month. Saudi Arabia’s output fell by 170kb/d, countering gains from Iran and Nigeria. Overall, the group pumped 27.82mb/d in August. News that Russia had agreed on further OPEC+ cuts also helped ease concerns. Deputy Prime Minister Alexander Novak said that it was in discussion with OPEC+ partners about extending its oil export cuts in October. US oil inventories also fell while demand topped pre-pandemic levels in May and June, according to EIA data.

European gas jumped last week after Australian LNG workers voted to take strike action. Workers at the Gorgon and Wheatstone LNG export facilities are scheduled to take industrial action as soon as 7 September after labour negotiations broke down with Chevron. The gains were tempered amid weak demand. Industrial consumption remains weak while the heating season is still several weeks away and temperatures across the continent are mild. Buyers in the North Asian LNG spot remain on the sidelines, happy with their level of inventories. Japan’s inventories are online with their five-year average, while China’s stockpiles may hit 90% of storage capacity this month.

European carbon posted a marginal weekly fall as the market started to absorb the impact of higher auction supply. Australia carbon credits units were also under pressure as more than 1.3m ACCUs hit the market last week.