Quick Bites | Slower Global Growth Pressuring Commodity Prices

China is slowing, Europe is slowing, and the US economy is also in the process of slowing down over the coming quarters. As a result, commodity prices are falling.

Prices for energy, which make up almost 60% of the S&P Global Commodities index, are declining because of weaker demand from China and more energy supply in the US.

Agriculture prices are falling, soybeans, driven lower by weaker global growth. But there are exceptions such as coffee, cocoa, livestock, and orange juice, where low supply is important.

Industrial metal prices are also falling because of weaker global growth. This is particularly important for Australia, with iron ore our largest and most important commodity export.  

For precious metals, gold prices are rising as geopolitical pressures continue to ratchet up in the Middle East, and as households in China diversify away from falling Chinese property prices and falling Chinese stock prices. Central banks are also buying gold. 

While global economic growth is evidently slowing, our base case for global economic growth remains positive and should be supportive for global equity markets, albeit note volatility may be elevated.

Source: Apollo