LIVE FUTURES REPORT 01/07: US-China trade truce buoys SHFE copper prices; nickel down 1.5% on rising stocks

Copper prices on the Shanghai Futures Exchange were up during morning trading on Monday July 1, buoyed by easing risk aversion after US President Donald Trump and China’s Xi Jinping agreed to a ceasefire on trade over the weekend.

Positive headlines out of the Group of 20 (G20) summit in Japan over the weekend, including the United States and China agreeing to restart trade negotiations after President Trump offered concessions to his Chinese counterpart, have brought relief to markets this morning.

The concessions included no new tariffs being imposed on China and an easing of restrictions on Chinese tech firm Huawei.

China in return agreed to make unspecified new purchases of US farm products and return to the negotiating table.

Although it remains unclear as to how close the two sides are to reaching a deal to end their prolonged trade war, market sentiment has been boosted by the developments.

“The markets G-20 base case scenario was doubtlessly validated, if not exceeded, on Saturday as the US will hold off raising tariffs while negotiations to end the trade war between the two countries continue. Over the short term this should be enough to anchor risk sentiment in our view,” Stephen Innes, managing partner at Vanguard Markets said in a morning note.

The most-traded August copper contract price ticked up to 47,350 yuan ($6,922) per tonne as at 10.19am Shanghai time, up by 340 yuan per tonne, or 0.72%, from Friday’s close of 47,010 yuan per tonne.

The gains in copper come despite rising stocks at SHFE sheds last week and the ending of a strike at Chilean producer Codelco’s Chuquicamata operation.

SHFE copper stocks rose by 11,272 tonnes, or 8.3%, to 146,019 tonnes on June 28, marking the first increase in deliverable stocks since March 29.

In supply news, union workers at Codelco’s Chuquicamata copper mining and smelting complex in Chile have accepted the company’s offer of a new labor contract, ending a strike that had started on June 14.

Further weighing on SHFE copper prices, as well as the broader complex, was lackluster data from China over the weekend. The country’s manufacturing and non-manufacturing purchasing managers’ indices (PMIs) for June were both as expected at 49.4 and 54.2 respectively, though the former remains in contractionary territory at below 50.

Data out early on Monday compounded the weaker outlook for the Chinese economy with the Caixin manufacturing PMI sliding to 49.4 in June, from 50.2 in the prior month. The reading was also below the forecast 50.1.

Other highlights

  • SHFE nickel prices led on the downside during morning trading on Monday after stocks of the metal rose by 3,208 tonnes, or 19%, to 20,464 tonnes on June 28. This compares with 11,101 tonnes at the start of June.
  • The most-traded August nickel contract price dropped to 99,930 yuan per tonne as at 10.19am Shanghai time, down by 1,560 yuan per tonne, 1.5%, from Friday’s close of 101,490 yuan per tonne.
  • The US dollar index edged up by 0.17% to 96.35 at 10.49am Shanghai time.
  • In data on Monday, there is a host of manufacturing data from Italy, France, Germany, the European Union and the US. US construction spending and ISM manufacturing prices are also of note.
  • In addition, ministers from Organization of Petroleum Exporting Countries (OPEC) will meet in Austria today and tomorrow to decide whether to extend their supply cuts, which should have some bearing on oil prices.