On Tuesday, the Federal Reserve cut the federal funds rate by half a percentage point to 1-1.25% in the first such emergency move since the 2008 financial crisis, amid growing concern that the viral outbreak could dent US economic growth.
“Initially markets responded strongly to the Fed’s emergency cut, but they have since settled down, with traders interpreting it as a sign that the economic implications of the epidemic are turning out to be greater than anticipated,” Rahul Khare, an analyst at ANZ Research, said in a morning report.
“Base metals were weaker as investors worried the US Fed’s emergency interest rate cut would not be enough to arrest the slide in economic growth,” Khare added.
Adding to the gloominess pervading global markets was further disappointing data out of China this morning; China’s Caixin services purchasing managers’ index, an indicator of economic health, slid to 26.5 in February, sharply down from the previous reading of 51.8. A reading below 50 indicates industry contraction.
This follows similarly weak data on Monday that showed the Caixin manufacturing PMI slid to 40.03 in February, down from 51.1 previous and well below the expected 46.1.
In regard to the base metals, zinc was the worst performer of the SHFE complex. The most-traded April zinc contract slid to 15,905 yuan ($2,281) per tonne at the close of morning trading, down by 285 yuan per tonne or 1.8% from Tuesday’s close of 16,190 yuan per tonne.
Losses were also observed in May aluminium at 13,205 yuan per tonne (-1.1%), April lead at 14,480 yuan per tonne (-0.7%) and May copper at 45,440 yuan per tonne (-0.7%).
Elsewhere, nickel and tin bucked the weaker tone exhibited by the rest of the complex. June tin was up by 0.2% at 135,940 yuan per tonne and June nickel rose by 0.1% to 102,990 yuan per tonne.
Other highlights
- The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.09% at 11.30pm Shanghai time, at 97.22.
- The Shanghai Composite Index was up by 0.07% at 2,994.86 as at 11.30am Shanghai time.
- In data on Tuesday, the United Kingdom’s construction PMI was better than expected at 52.6, exceeding the forecast reading of 49.0. The European Union’s consumer price index flash estimate showed a 1.2% gain in February, lower than the expected 1.4% increase.
- In data on Wednesday, there is a host of services PMI releases out across Europe and the US, while the US’ Institute for Supply Management non-manufacturing PMI and crude oil inventories are also due.