LIVE FUTURES REPORT 02/08: Trump’s $300bln tariff threat sinks SHFE base metals prices; Ni climbs 1.4%

Barring those for nickel and tin, base metals prices on the Shanghai Futures Exchange were all down during morning trading on Friday August 2 after a surprise tariff announcement from the United States escalated trade tensions with China.

US president Donald Trump announced via social media platform Twitter on Thursday that the US will impose a 10% tariff on another $300 billion of Chinese goods from September 1.

“…the US will start, on September 1st, putting a small additional tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%,” Trump said.

The announcement came after China and the US concluded the latest round of trade talks in Shanghai this week.

“Markets are reeling after President Trump expressed his frustration with China’s stalling techniques… by imposing more tariffs on Chinese goods. With the global markets on edge after [US Federal Reserve chair Jerome] Powell communication failed so miserably, few traders have been willing to step in front of this steam roller,” Stephen Innes, managing partner at VM Markets, said in a morning note.

Coupled with the rising risk aversion stemming from the latest trade developments, a strong US currency also continued to sap investors’ appetite for commodity investment this morning.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 98.31 as at 9.54am Shanghai time. Though this is down from a high of 98.94 on Thursday, the index remains in relatively high ground.

As a result of this unfavorable backdrop, most SHFE base metals prices were down on Friday morning.

Copper gave the worst performance of its peers, with the red metal’s most-traded September contract at 46,420 yuan ($6,690) per tonne as at 9.53am Shanghai time, down by 200 yuan per tonne, 0.4%, from Thursday’s close of 46,620 yuan per tonne.

While a drop in spot copper concentrate treatment and refining charges (TC/RCs) is likely to bring less refined copper globally in the near term, weak demand amid the seasonal slowdown is likely to keep copper prices depressed.

“Selling pressure could continue a little longer, especially during the slow summer months, we expect physical demand to improve from next month, which should give copper prices a boost,” Boris Mikanikrezai, research analyst from Fastmarkets, said.

Other highlights

  • September aluminium (-0.3%), September zinc (-0.3%) and September lead (-0.4%) also weakened during the morning session, while tin (+0.4%) and nickel (+1.4%) managed to shrug off the unfavorable trade conditions to record gains.
  • The Shanghai Composite Index was down by 1.45% at 2,866.57 as at 10.44am Shanghai time.
  • In European data on Thursday, the United Kingdom’s manufacturing purchasing managers’ index (PMI) for July remained in contraction territory, holding unchanged at 48.
  • In data from US on Thursday, the ISM manufacturing PMI for July was slightly lower at 51.2, compared with 51.7 previously.
  • US data on Friday includes the July jobs report, factory orders and a revised reading from the University of Michigan that is expected to confirm the small acceleration in consumer sentiment during July.
  • The main focus, however, will be the all-important non-farm payrolls release, which is forecast to show the US added 164,000 non-farm payrolls last month, after adding 224,000 jobs in June.
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