LIVE FUTURES REPORT 04/02: Most SHFE base metals prices recover slightly after Monday’s selloff; Al dips by 0.1%

Base metals prices on the Shanghai Futures Exchange staged a minor recovery during the morning trading session on Tuesday February 4, with the complex showing more resilience after Monday’s broad-based sell-off.

The tentative stabilization this morning comes after a dire performance on Monday, which saw the SHFE base metals all end the day deep in negative territory while Chinese markets caught up with the price performance seen on the London Metal Exchange during China’s extended Lunar New Year holiday.

Rising risk aversion driven by the worsening coronavirus outbreak was the main reason behind the price weakness experienced in global markets since Chinese markets closed on January 23.

But a lack of news on the virus overnight and reports that China’s central bank will inject around 1.2 trillion yuan ($171 billion) of liquidity into Chinese money markets via open market reverse repo operations provided some respite, allowing the base metals to rebound slightly this morning.

Nickel led the recovery, with the metal’s most-traded April contract rising to 103,670 yuan per tonne at the close of the morning trading session, up by 1,480 yuan per tonne or 1.5% from a close of 102,190 yuan per tonne on Monday.

Elsewhere, the March copper contract inched up by 0.1% to 45,080 yuan per tonne, the March zinc contract edged up by 0.1% to 17,315 yuan per tonne, the March lead contract rose by 0.5% to 14,290 yuan per tonne and the June tin contract climbed by 1.3% to 132,480 yuan per tonne.

Aluminum was the lone metal to record a loss at the close of Tuesday’s morning trading session; the most-traded March aluminium contracted dipped by 0.1% to 13,590 yuan per tonne.

Despite the firmer performance by the base metals on Tuesday, the outlook is still quite bearish with China said to be mulling a lower growth target for 2020.

“Chinese officials are evaluating whether the target for economic growth this year should be softened. The target is normally revealed in March and economists had already expected a softening to ‘around 6%’ from 6-6.5% in 2019,” David de Garis, director and senior economist with National Australia Bank, said in a morning note.

“The coronavirus is currently inflicting a heavy blow to its economy so it stands to reason that growth will be much weaker, even if there is ultimately a rebound of sorts next quarter on a quick passing of the viral epidemic,” de Garis added.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.03% to 97.83 as at 11.33am Shanghai time. This compares with a reading of 97.48 at a similar time on Monday.
  • The Shanghai Composite Index was up by 0.21% at 2,752.44 as at 11.30 am Shanghai time.
  • In data on Monday, final manufacturing purchasing managers’ index (PMI) readings were slightly better than expected from the United States and the United Kingdom, at 51.9 and 50 respectively, both beating initial forecasts of 51.7 and 49.8. The US’s ISM PMI was at 50.9, above expectations of 48.5.
  • The rest of Europe also fared well, with final manufacturing PMI readings with France at 51 which was in line with forecasts, Italy at 48.9, beating expectations of 46.9, Germany at 45.3, above forecast of 45.2 and the Europe Union at 47.9, above forecast of 47.8.
  • Total vehicle sales from the US were at 16.8 million, in line with expectations.
  • In data on Tuesday, the UK’s construction PMI, the EU’s PPI and factory orders and IBD/TIPP economic optimism from the US are scheduled.