Comment: ‘What to expect from key assets in Q3’

Nikos Tzabouras, Senior Financial Editorial Writer at Tradu, on what to expect from key assets in Q3.

• Copper has had a stellar year so far and this will continue, especially as it’s helping to bolster the AI revolution and clean energy transition.

• Industrial consumption in Asia has been a much-needed boost for natural gas. However, there are headwinds on the horizon to be aware of such as warmer weather and Europe’s reduced usage.

• Nasdaq Composite has reached new heights this year and rivals are struggling to keep up.

• Favourable monetary policy in Q3 will be a boost for DAX30, however we must anticipate backlash from EU political activity.

• BoE’s rate decision today is good news for the UK economy and will be a boost for the stock market.

Copper

“Copper reached record highs this year and despite the subsequent pullback, supply-demand dynamics are set to drive more gains. Consumption will increase further, as the metal is a vital component in the artificial intelligence revolution and the clean energy transition. At the same time, supply has tightened significantly, with major miners cutting their production targets for this year. There are risks to the favourable fundamentals though, like China’s distressed property sector and the slowdown in EV adoption.”

Natural Gas

“After a stagnant 2023, demand is expected to grow substantially this year, largely due to industrial consumption from Asia. On the supply side things are a bit murkier as major drillers have slashed their output targets. Natural gas rallied in the second quarter and the improved fundamentals can drive further upside. The commodity is shielded from the adverse impacts of the shift away from fossil fuels since it is largely considered a bridge energy source. There are headwinds though, like Europe’s reduced usage and the historically warm weather. China is a prominent source of risk with its uneven recovery, while India’s growth may have peaked, and the diminished mandate of PM Modi creates some uncertainty.”

Nasdaq Composite

“The path of least resistance is up and towards new record highs, driven by the AI boom, which also shields the tech-heavy index from the Fed’s reluctance to slash interest rates. The generative AI arms race heats up, as Nvidia churns out AI chips at an accelerated cadence to meet demand, while rivals like Intel and AMD up their game to catch up. Monetary policy causes headwinds, but the Fed is still expected to cut rates later this year.”

DAX30

“The rally of the German index stalled in the past few months but can reaccelerate in Q3 due to favourable monetary policy. The ECB became the first of the Big-3 to lower rates and the less restrictive stance will be a boon for the stock market. The policy differential can also weigh further on the common currency and make German stocks even cheaper for foreign investors. At the same time, the economy already exited its brief recession and better days are likely ahead. On the other hand, the ECB has pointed to a cautious stance ahead due recent inflation and wage persistence. We cannot discount political risks either after the EU elections sparked uncertainty and the Chancellor’s party suffered heavy losses.”

FTSE100

“The UK economy is recovering, and inflation has dropped substantially, while the central bank has pointed to upcoming lower interest rates, likely within the summer period. This creates optimism for a resurgence in the UK stock market, following the recent correction. Sentiment could get a lift if Shein does go public in London in a much-needed victory, after losing home-grown Arm to New York last year. There are risks though to the cheerful prospects. Inflation is expected to accelerate again and there is high uncertainty around the timing of the BoE rate cut, while July’s general elections add another level of complexity.”