London, 6 August 2011

Morgan Stanley – The Commodity Call: In light of recent data pointing to a rapidly slowing manufacturing sector, Morgan Stanley have reviewed their outlook and price deck for all metals and bulk commodities in their coverage universe. They have also lifted forecasts for gold and silver owing to:

1) Enhanced contagion risk from the European debt crisis

2) Continued uncertainty over US macroeconomic outlook

3) The possibility of renewed QE

All are likely to support investor demand. In base metals, copper remains Morgan Stanley's most favored exposure owing to ongoing supply risks, followed by aluminium.

" Clearly growth is slowing, but for many commodities, not enough to address supply constraints," according to Hussein Allidina at Morgan Stanley Global Research. "For crude, we expect increased seasonal demand in 3Q 2011 will prove constructive for timespreads, although returning North Sea production and SPR stock releases are headwinds. We remain bearish on gas. Production remains robust and demand is still lagging. We are constructive on precious metals, as slowing GDP growth and debt concerns continue to fuel investor demand. In grains, we remain bullish on corn and soybeans but expect wheat to underperform," he adds.

Ends --

Hussein Allidina, CFA, Morgan Stanley, New York.

For more on Morgan Stanley Research go to www.morganstanley.com