LIVE FUTURES REPORT 05/04: LME base metals prices rebound amid hopes of US-China trade talks

The LME three-month copper price was at $6,747 per tonne as of 03.29am London time, up by $23 per tonne from Wednesday’s closing price. A total of 226 lots of the contract have traded so far. The contract had fallen as low as $6,621.50 per tonne on Wednesday, the lowest since March 28.

The Shanghai Futures Exchange is closed on Thursday and Friday to mark the Qing Ming Festival, or tomb-sweeping day.

Base metals prices on SHFE and the LME both came under pressure on Wednesday after the US proposed a 25% import tax on 1,300 Chinese products, which included unwrought aluminium and aluminium products, after its Section 301 investigations. A consultation process and public hearing are still required prior to implementation of the tariffs.

In response, China said late on Wednesday that it will impose a 25% import tax on $50 billion worth of US-origin products including soy beans, automotives, chemicals and airplanes, though it did not say when the proposed tax will be implemented.

“No date has been set for the proposed tariffs put forward by China or the US, meaning we could see uncertainty continue for the next couple of months. This also means negotiation is still firmly on the table, and markets have been comforted by speculation that tariff threats will not have a substantial economic impact. That said, markets are looking for reassurance,” ANZ Research said on Thursday morning.

US President Donald Trump’s top economic adviser, Larry Kudlow, was cited in news reports as saying “Yes, it’s possible. It’s part of the process,” when asked if the latest US tariffs plan may never take effect and may be a negotiating tactic. He also called the announcements by the two countries opening proposals.

ANZ, however, still warned that China’s move to target US automobile imports could have a significant impact on copper demand should China move ahead to impose the tariffs.

But for now, sentiment in the copper market has also buoyed after China announced a cut in value-added tax (VAT) on all imported goods by 1 percentage point to 5.9% effective on May 1. This is expected to boost demand for overseas copper cathodes and improve import arbitrage opportunities. 

Other LME base metals prices higher

• The three-month aluminium contract rose $6 to $1,997 per tonne.
• The three-month lead contract increased $4.50 to $2,376.50 per tonne.
• The three-month zinc contract gained $4.50 to $3,262.50 per tonne.
• The three-month tin contract was up $40 to $20,940 per tonne.
• The three-month nickel contract edged higher by $130 to $13,280 per tonne.

Currency moves and data releases

• The dollar index was increased by 0.06% to 90.15 as of 10.29am Shanghai time.
• The Brent crude oil spot price rose by 0.07% to 68.30 as of 10.28am Shanghai time.
• In equities, the Shanghai Composite closed 0.18% at 3,131.11 on Wednesday. The Dow Jones Industrial Average finished 0.96% or 230.94 points higher at 24,264.30 on Wednesday.
• In US data released on Wednesday, the ADP March non-farm employment change – a precursor to Friday’s official jobs report – showed 241,000 Americans joined the labor market, which was above the forecast of 208,000. The final services purchasing managers’ index (PMI) came in at 54 in March, close to an expected print of 54.3, and the ISM non-manufacturing PMI was similarly close to expectations at 58.8 for the same month, when 59 had been called for.
• US factory orders for February disappointed with an increase 1.2%, compared with forecast growth of 1.7%. Weekly crude oil inventories fell 4.6 million barrels, as opposed to expectations for a 1.4-million-barrel increase.
• Key economic data due later today includes the United Kingdom’s services PMI as well as the US’ unemployment claims and trade balance.
• In addition, US Federal Open Market Committee member Raphael Bostic is speaking.