Citi Says U.S. and China Will Nail Deal, Aiding Commodities (Bloomberg News – April 23, 2019)

The outlook for commodities is bullish, according to Citigroup Inc., which expects raw materials to be supported by a confluence of positive factors including the agreement of a trade deal between Washington and Beijing, improved demand from China, and a weaker dollar.

The bank’s base case is that the U.S. and China will agree to end their protracted trade fight by end-June, paving the way for tariffs to be lifted, analysts including Ed Morse said in a report. A deal between the two economies is now “on course” for the end of the second quarter, the bank said.

Raw materials have advanced in 2019 aided by gains in energy and metals, with the latest leg up this week driven by the U.S. decision not to extend sanctions waivers for buyers of Iranian crude.

At the same time, the U.S. and China have stepped up the pace of diplomacy to try to resolve their trade squabble, with speculation that an agreement may come next month. A resolution would benefit demand for commodities from soybeans to pork.

“Partly as agreed during the trade talks, China is expected to boost purchases of energy and agricultural products from the U.S. in the months and years ahead,” the bank said.

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