LIVE FUTURES REPORT 04/03: SHFE base metals prices broadly down after weak US economic data

The weak performance by the base metals follows a raft of soft economic data releases from the United States at the end of last week which dented market sentiment.

“US data releases on Friday night were unequivocally soft. The all-important ISM manufacturing [purchasing managers’ index (PMI)] fell to a 2-year low, coming in 54.2 from 56.6 and against expectations of a smaller decline to 55.8,” Rodrigo Catril, currency strategist at National Australia Bank, said in a morning note.

“Details on the survey were not that impressive either; production fell to 54.8 from 60.5, new orders came at 55.5 from 58.2 and employment at 52.3 from 55.5,” Catril added.

The University of Michigan’s (UoM) index of consumer sentiment was similarly disappointing, dropping to 93.8 in February, up from 91.2 in January but below the previous estimate of 95.5.

Adding to the risk-off tone in the market was a firmer US dollar; the dollar index, at 96.41 as at 10.30am Shanghai time, is up from 96.23 at a similar time last Friday.

As a result, most of the base metals prices on the SHFE were down this morning, with zinc falling the most. The most-traded zinc contract on the SHFE stood at 22,075 yuan ($3,290) per tonne as at 10.30am Shanghai time, down by 225 yuan per tonne or 1% from last Friday’s close of 22,300 yuan per tonne.

While zinc prices on the London Metal Exchange continue to find support from record low volumes of the metal contained in the exchange’s warehouses, stocks on the SHFE have risen significantly since the end of last year; SHFE zinc stocks totaled 113,175 tonnes on March 1, an increase of 93,072 tonnes from 20,103 tonnes on December 28, 2018.

Furthermore, zinc stocks in the Shanghai-bonded zone recorded another steady month-on-month increase in February on the expectation of an uptick in domestic demand.

Shanghai-bonded zinc stocks totaled 79,000-86,000 tonnes last month, up 5% from January’s 75,000-82,000 tonnes, according to Fastmarkets’ latest assessment.

Base metals prices

• The SHFE May aluminium contract inched up 20 yuan per tonne to 13,705 yuan per tonne.
• The SHFE April copper contract tumbled 250 yuan per tonne to 50,250 yuan per tonne
• The SHFE April lead contract was down 95 yuan per tonne to 17,685 yuan per tonne.
• The SHFE May nickel contract price dropped 140 yuan per tonne to 104,600 yuan per tonne.
• The SHFE May tin contract price plunged 790 yuan per tonne to 150,280 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.04% to 96.43 as at 10.30am Shanghai time.
• In equities, the Shanghai Composite was surged 1.71% to 3,045.32 as at 11.01 am Shanghai time.
• In European data last Friday, the Spanish manufacturing purchasing managers’ index (PMI) for February fell to 49.9, missing an expected fall to 51.8 from 52.4 previously. The Italian manufacturing PMI over the same period ticked lower to 47.7, from 47.8 previously.
• In Germany, the final manufacturing PMI for February was flat across the board at 47.6, while the French final manufacturing PMI was in positive territory over the same period at 51.5, from 51.4 previously.
• The European Union’s final manufacturing PMI for February remained in negative territory at 49.3, improving from 49.2 the previous month.
• Elsewhere, German retail sales month on month improved to 3.3% from 3.1% in January, while the country’s unemployment change was recorded at 21,000. Italy’s monthly unemployment rate for February was recorded at 10.5%.
• In US data last Friday, the ISM manufacturing PMI for the February period fell to 54.2 from 56.6 previously, while the core PCE price index month on month over the same period was flat at 0.2%. Personal spending for February fell to -0.5%, from 0.6% previously.
• Revised UoM consumer sentiment came in below expectations at 93.8 for February, compared with the preliminary reading for February of 95.5.
• In data on Monday, EU Sentix investor confidence, UK construction PMI and US construction spending are of note.