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Investors have switched focus from the recent positive developments in the US-China trade war after the release of disappointingly weak manufacturing purchasing managers’ index (PMI) data on Monday reignited fears of a slowdown in the global economy.
In China, the Caixin manufacturing PMI slid to 49.4 in June from 50.2 in the prior month. The reading was also below the forecast 50.1 and at below 50 remains in contractionary territory.
This was followed by similarly weak final manufacturing PMI readings out of Spain (47.9), Italy (48.4), Germany (45.0), the European Union (47.6) and the United Kingdom (48.0).
A firmer dollar added to the less risk-friendly environment this morning.
The dollar index, which measures the value of the US dollar against a basket of foreign currencies, was up by 0.03% at 96.84 as at 11.10am Shanghai time on Monday. This compares with a recent low of 95.84 on June 25.
Nickel fell the most during the early session on Tuesday, with elevated stocks and soft demand pressuring prices for the metal.
The most-traded August nickel contract dropped to 97,340 yuan ($14,182) per tonne as at 10.31am Shanghai time, down by 2,330 yuan per tonne, or 2.3%, from Monday’s close of 99,670 yuan per tonne. This morning also saw the metal’s price fall to its lowest level since June 13.
Deliverable nickel stocks at SHFE warehouses climbed by 3,208 tonnes, or 19%, to 20,464 tonnes on June 28. This compares with 11,101 tonnes at the start of June.
Further denting investors’ confidence towards the metal is the weakening demand from stainless steel mills in both China and Indonesia.
“Stainless steel mills in Indonesia are likely to cut production in order to contend with the anti-dumping duties imposed on them by China and South Korea,” an analyst with China-based brokerage Galaxy Futures said in a morning note.
“In June and July, domestic Chinese 300-series stainless steel production has dropped lightly, which is subduing the demand for nickel,” the analyst added.
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