Metal and oil prices may have enjoyed a bounceback in recent days but investment bank Goldman Sachs reckons the recovery could be short-lived.
Iron ore prices climbed nearly a fifth to US$62.6 a tonne on Monday amid hopes that China would launch fresh stimulus to kick-start the country's ailing economy.
Other metals such as copper have also risen and the oil price has revived to about US$40 a barrel as Middle East producers face growing political and financial pressure to limit or reduce supplies.
The price rise has followed in the footsteps of an increase in steel prices, despite a lack of any clear recovery in steel demand.
It has led to speculation that the increases could be due to Chinese companies stockpiling ore in the hope that Beijing will pump-prime the economy - which may or not happen.
And some financial institutions such as Goldman have given a distinctly bearish response to the upbeat sentiment, saying it may not last long.
The revered investment bank forecast in a note this week that the rally in commodity prices will run out of steam, with prices of copper and aluminium falling as much as 20% in the coming year.
There are concerns that miners and oil producers will respond to any rise in prices by increasing supply, making continued increases unsustainable.
Goldman analysts said in a note: "Higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices. But this lesson will likely only be learned through false starts.”
Goldman also poured cold water on suggestions that oil prices were in for a sustained rally, saying prices have to remain lower for supplies to fall and re-balancing to occur.
“Only a real physical deficit can create a sustainable rally which is still months away should the behavioral shifts created by the low prices in January and February remain in place,” the bank said.
Shore Capital voiced doubts about any prospect of economic recovery in China, saying recent data and anecdotes appeared to suggest the situation was getting worse.
The broker said it was therefore inclined to bet on falls in prices of base and industrial metals such as iron ore, copper and nickel, as well as the shares of big miners, such as BHP Billiton LImited (LON:BLT), Rio Tinto LImited (LON:RIO) and Anglo American plc (LON:AAL).
Poor fundamentals
As if to underline that, Chinese February trade data came in much worse than expected on Tuesday, with exports falling by more than a quarter.
Analysts at Capital Economics said the iron ore price surge should be seen in the context of improving sentiment towards industrial commodities in general.
The even larger price falls that occurred before had also left lots of room for more surprises on the upside, they said.
"However, the underlying fundamentals are still poor; iron ore remains in structural oversupply, with plenty of low-cost production now ready to meet any cyclical pick-up in demand," the economic research house said in a note.
"With speculative pressures at work too, this makes us doubly wary of drawing any firm conclusions from iron ore prices about the health of the global economy."
In a note on Tuesday, credit rating agency Moody's sounded an upbeat note, saying that while the current environment was likely to curb growth in specific regions, it did not herald a global recession.
Senior vice-president Elena Duggar said: "The most recent real economic indicators for the advanced economies, such as strong employment growth in the US, have been indicative of more sustained, albeit modest, growth than suggested by the shift in bond and equity markets.
"Risks to global growth have increased, but despite the recent market volatility, we don't believe that the world's advanced economies will enter into recession."