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“D-day is approaching for increased tariffs on trade between the US and China, with no signs of capitulation from either side. Trump has stated the US isn’t ready to make a deal and that tariffs on Chinese goods ‘could go up very very substantially, very easily’,” David Plank, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.
The comments reignited risk-off sentiment in the market, which was compounded by a rebound in the dollar index overnight.
The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, stood at 97.80 as at 9.47am Shanghai time, up from a low of 97.55 on Monday.
A slump in Chinese industrial profits last month, highlighting the effect that a prolonged trade spat between China and the United States is having on the Chinese economy, further weighed on market sentiment.
Profits for China’s industrial firms dropped by 3.7% year on year to 515.4 billion yuan ($74.7 billion) in April, according to data published by the National Bureau of Statistics on Monday. This compared with a 13.9% surge in March, which was the biggest gain in eight months.
This less-friendly backdrop for the base metals was sufficient to keep the SHFE complex under pressure, with copper, aluminium and nickel declining – albeit marginally, while tin and lead were both up by 0.3%.
Zinc was this morning’s standout performer after its most-traded contract climbed by 1.7%.
Zinc’s most-traded July contract rose to 20,695 yuan per tonne as at 10:11 am Shanghai time, up by 335 yuan per tonne from Monday’s close of 20,360 yuan per tonne.
The strength in zinc prices follows news that a 100,000-tonne-per-year zinc smelter in northwest Chinese province of Gansu has suspended operations following a sulfur dioxide leak. The cause of the leak is under investigation.
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