LIVE FUTURES REPORT 05/03: SHFE base metals prices broadly up on further monetary easing

Barring those for lead and tin, base metals prices on the Shanghai Futures Exchange were in positive territory at the close of morning trading on Thursday March 5, with the complex supported by further government stimulus to offset the negative economic impact of the novel coronavirus (2019-nCOV) outbreak.

In the latest move by central banks to ease monetary policy, the Bank of Canada on Wednesday delivered a 50-basis-point cut to its key interest rate target, dropping it to 1.25%. This follows a similar move by the United States Federal Reserve on Tuesday, when it cut the federal funds rate by half a percentage point to 1-1.25%.

Market participants expect other central banks will follow up on recent rate cuts, while the gradual resumption of industrial operations in China and a slowing spread of the coronavirus in the country has helped lift investors’ moods this morning.

Sentiment was also boosted by news on Wednesday that the International Monetary Fund has set aside $50 billion of aide to support coronavirus-hit countries.

But disappointing data out of China yesterday has put a cap on the positivity; China’s car sales had the largest monthly decline on record with an 80% drop in February, according to data from the China Passenger Car Association, after the coronavirus kept buyers away.

As a result, gains across the SHFE base metals complex were fairly limited this morning. Nickel was the outperformer in terms of percentage gains, with its most-traded June contract rising to 103,540 yuan ($14,878) per tonne at the close of the morning session, up by 0.71% or 730 yuan per tonne from Wednesday’s close of 102,810 yuan per tonne.

Gains were also recorded in May copper at 45,500 yuan per tonne (+0.18%), April aluminium at 13,215 yuan per tonne (+0.08%) and April zinc at 16,115 yuan per tonne (+0.40%). June tin was little changed at 136,390 yuan per tonne, down by just 30 yuan per tonne from its close on Wednesday, while April lead fell by 0.1% to 14,440 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was slightly down by 0.03% at 97.33 as at 12.05am Shanghai time.
  • The Shanghai Composite Index was up by 1.4% at 3,053.91 as at 11.30 am Shanghai time.
  • In US data on Wednesday, the Automatic Data Processing (ADP) non-farm employment change rose by 183,000 in February, higher than the expected increase of 170,000 but down from the previous rise of 209,000. The Institute for Supply Management (ISM) non-manufacturing purchasing managers’ index (PMI) was better than expected at 57.3, exceeding the forecast 54.9 reading.
  • On Thursday, there are Organization of Petroleum Exporting Countries (OPEC) meetings scheduled throughout the day, while US employment figures and monthly factory orders are also due.