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Watch Boao Forum, Lima summit for big picture on commodities

London

WE live in interesting times. Just as investors weigh up the US-China trade punch-up, markets need to adjust to a whole new front. US sanctions against Russian companies and oligarchs are upending aluminium. The metal's surging, while shares in United Co Rusal are in the grinder. What should we expect this week? And what does it mean for Glencore Plc?

On top of that, there are two gatherings that'll shape the big-picture agenda. In Asia, China's leadership, including President Xi Jinping, will deliver their take from the Boao Forum for Asia. And in Peru, heads of state from across the Americas will gather in Lima for a summit that may provide a backdrop for a breakthrough on fraught Nafta talks between the US, Mexico and Canada.

Beyond that lot, trade tensions still feature prominently: the copper industry meets in Chile for Cesco week to assess the outlook; agricultural investors will pore over snapshots of supply and demand from the US and Brazil; and the world's oil heavyweights congregate in India just before Opec and the International Energy Agency offer their latest assessments.

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With the spotlight on China's leadership as trade tensions spike, investors will track the tenor and substance of remarks coming out of this week's Boao Forum for Asia in Hainan, the local equivalent of Davos. President Xi is going, together with other senior officials and invitees including International Monetary Fund head Christine Lagarde. The fight with the US carries implications for materials across the board, especially soya, metals and gold.

Before the meeting, Foreign Minister Wang Yi signalled there'd be details on new reforms, including measures to further open the second-largest economy. After the talking's done - with Mr Xi's address due on Tuesday - mainland trade data on Friday will give a snapshot of how commodity demand stacked up over the first quarter. Watch for the prints on oil, iron, steel, copper and soyabeans.

Some good news

A gathering of heads of state and business leaders in Lima, Peru, this week may be the stage for some good news on trade. The US administration is said to be pushing for a preliminary Nafta deal to announce at the Summit of the Americas on Friday or Saturday. President Donald Trump has said that the exemption on steel and aluminium tariffs granted to Canada and Mexico will expire on May 1 if he's not satisfied with the Nafta talks.

On Thursday, Barrick Gold Corp president Kelvin Dushnisky and Freeport-McMoRan Inc chief executive officer Richard Adkerson participate in a series of CEO panels. Investors, traders and analysts will be eager to learn how executives are navigating the US-China trade friction and how they would assess impact on demand for metals.

Global trade tensions extend well beyond the US-China standoff, with Washington's robust new sanctions against Russian tycoons, companies and allies of President Vladimir Putin roiling markets. Push-back from the Kremlin will come: Russia's Foreign Ministry is working on measures, ministry spokeswoman Maria Zakharova said on a state television channel.

The fallout is hitting aluminium given the importance of United Co Rusal, the world's biggest producer outside China, and billionaire owner Oleg Deripaska. Rusal's initial assessment is the sanctions may result in technical defaults, and it's likely the moves will hurt the company's business. Aluminium is rallying in London on Monday, extending Friday's gains, while Rusal stock plunges. All that may pose a challenge for Glencore, one of Rusal's top holders.

Identity crisis

Over in Santiago, top mining executives, traders and investors will gather for the annual Cesco copper week, with talking points spanning the global trade brawl to labour tensions. The market is enduring something of an identity crisis, with its short-term outlook dimmed by large stockpiles and the US-China trade showdown that threatens to undermine demand.

Strikes, or the lack thereof, will also likely feature in conversations among the attendees. Prices climbed last year after a 44-day strike at BHP Billiton Ltd's Escondida mine in Chile disrupted supply, helping push the market into a deficit. While this year is poised to be the busiest on record for workers' contract negotiations, there's growing optimism that companies and unions could reach an agreement, avoiding disruptions.

This week, oil traders will watch out for reports from two of the industry's most influential institutions - Opec and the International Energy Agency. The pair will publish monthly reports with their latest forecasts for supply and demand in 2018, which may provide clues on which way prices are headed.

The snapshot from Opec, which has been curbing supply to reduce a glut comes on Thursday, with the IEA assessment due the next day. Also in the focus this week, the market's biggest guns including Saudi Arabia's Energy Minister Khalid Al-Falih, Opec secretary-general Mohammed Barkindo and IEA executive director Fatih Birol will gather in New Delhi for the International Energy Forum.

Hedge funds have been increasing their net-short position on raw sugar and traders aren't optimistic on the sweetener's outlook either, as a global glut persists. Half of the analysts and traders surveyed by Bloomberg were bearish, the most since December.

Sentiment was also negative on soyabeans, while traders and analysts were split on natural gas and gold. BLOOMBERG