LIVE FUTURES REPORT 02/10: Chinese data, SHFE stock drawdowns prop up LME base metals prices

The LME three-month copper contract traded at $6,529 per tonne as of 03:43 BST, up $48 from Friday’s close, with around 400 lots of the contract changing hands so far.

In data released on Saturday, China’s official manufacturing purchasing managers’ index (PMI) for September came in at 52.4, above forecast of 51.5 and August’s reading of 51.7 – the September print was the highest since April 2012.

“With news that some parts of heavier-polluting Chinese industry will be curtailed from this month…the official Manufacturing PMI – and the non-manufacturing PMI for that matter – released over the weekend revealed no such net impact,” National Australia Bank said on Monday.

While the cutbacks may not yet have played out given that the PMI was for September, the bank added “there was certainly no sign from this report of some slowing in the core Chinese economy.”

Noting that new orders were the key driver for the manufacturing PMI, “this was the first time new orders beat output this year, suggesting a potential ‘excess demand’ to some extent. It also provides upside risk for Q3 GDP and our forecast of 6.7% for 2017,” ANZ Research noted on Monday.

The Caixin manufacturing PMI for September came in at 51 on Saturday, below the expected 51.5 and August’s reading of 51.6.

The Chinese manufacturing sector continued to expand in September, though this was at a slightly weaker rate, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said, with regards to the Caixin PMI.

“The Chinese economy was stable in the third quarter. But the outstanding price pressure from upstream industries will be a drag on the continued improvement of companies’ profitability,” he added.

The official PMI is more focused on large state-owned firms, while the independently surveyed Caixin PMI is closely watched for conditions among the country’s private sector. A PMI reading of above 50 reading signifies expansion, and below, contraction.

China’s official non-manufacturing PMI for September came in at 55.4, above August’s reading of 53.4.

Meanwhile, base metals stocks in SHFE-approved warehouses were mostly lower last week – except for aluminium and lead – with copper registering a drop of 27% over the week to 103,151 tonnes on September 29 in its sixth week of decline.

Rest of complex higher

• The LME three-month zinc contract rose $4 to $3,166 per tonne.
• The SHFE November aluminium contract price increased $5 to $2,107 per tonne.
• The SHFE November lead contract price gained $18.50 to $2,503.50 per tonne.
• The SHFE January nickel contract price edged up $35 to $20,710 per tonne
• The SHFE January tin contract price rose $35 to $10,535 per tonne.

Currency moves and data releases

• The dollar index was up 0.29% to 93.34 as of 03:36 BST. It has eased after reaching as high as 93.67 on September 28, the highest since August 18.
• In other commodities, the Brent crude oil spot price fell 0.28% to $56.53 per barrel as of 03:36 BST.
• China’s central bank said on Saturday that it would cut the reserve requirement ratio –which is the amount of cash that some banks must hold as reserves – for the first time since February 2016 so as to encourage lending to small business and the agricultural sector.
• In US data on Friday, the Chicago PMI exceeded expectations in September with a 65.2 reading, above estimates of 58.5. Personal spending and income in August were both in line with estimates at 0.1% and 0.2%, respectively. The revised University of Michigan consumer sentiment disappointed at 95.1, below the forecast of 95.3. Revised inflation expectations came in at 2.7%.
• Economic data due later today includes final manufacturing PMI, ISM manufacturing PMI, construction spending, ISM manufacturing prices from the USA and manufacturing PMI from the UK.
• The SHFE is closed from October 2-6 due to China’s week-long National Day holiday.