LIVE FUTURES REPORT 04/09: SHFE base metals prices fall on escalating US-China trade dispute

In a series of posts on social media platform Twitter on Tuesday, US President Donald Trump said that Chinese manufacturing would “crumble” if the country did not agree to the US’ trade terms.

“We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of “ripoff USA”($600 B/year),16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot… And then, think what happens to China when I win. Deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!” Trump said.

“Risk sentiment has veered cautiously off following reports that trade talks between the United States and China have not been able to secure a suitable date to restart negotiations this month despite the positive rhetoric that both sides were ready to work on a deal,” Fastmarkets research analyst Andy Farida said.

Soft US manufacturing data overnight was a further headwind for the base metals this morning.

A gauge of US manufacturing from the Institute for Supply Management (ISM) showed the sector unexpectedly contracted in August, marking the first decline since 2016. The ISM manufacturing purchasing managers’ index (PMI) slid to 49.1 last month, down from 51.2 previously. A reading below 50 signals industry contraction.

As a result of the less friendly backdrop, the base metals were largely down during the morning session on Wednesday, with nickel giving the worst performance on the SHFE complex after several days of rallying.

The most-traded nickel contract fell to 145,290 yuan ($20,235) per tonne as at 10.10am Shanghai time, down by 1,430 yuan per tonne – or 1% – from Tuesday’s close of 146,720 yuan per tonne.

“The rally in nickel prices took a breather, as investors took stock of the Indonesian ban on nickel ore exports,” analysts with ANZ Research said in a morning note.

Lead, gave the second-worst performance, with its most-traded October contract falling 90 yuan per tonne to 17,270 yuan per tonne as at 10.10am Shanghai time.

Other highlights

• Bucking the downtrend in the SHFE base metals was aluminium, the most-traded October contract of which was up by 60 yuan per tonne – or 0.4% – to 14,370 yuan per tonne as at 10.10am Shanghai time.
  The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.02% at 98.94 as at 10.56am Shanghai time.
• The Shanghai Composite Index was up 0.47%, at 2,942.71 as at 10.56am Shanghai time.
• In data today, China’s Caixin services PMI came in at 52.1 for August, up from 51.6 in July.
• Later, there is a host of services PMI data out across Europe and the US. Inflation report hearings from the United Kingdom and a speech by US Federal Open Market Committee member John Williams are also notable.