LIVE FUTURES REPORT 06/06: Macroeconomic concerns keep SHFE base metals prices under pressure; Cu slides 1.3%

Base metals prices on the Shanghai Futures Exchange were mostly down during morning trading on Thursday June 6, with concerns of a global economic slowdown weighing on the complex.

On Wednesday, the International Monetary Fund (IMF) cut its forecasts for economic growth in China, saying that its trade war with the United States is tilting the balance of risks to the downside.

The IMF downgraded its prediction for Chinese economic growth in 2019 to 6.2% having only raised it to 6.3% two months ago. The forecast is still within Beijing’s growth target range of 6-6.5%, however.

Also on Wednesday, the World Bank lowered its global growth forecasts for this year, now expecting the world economy to expand by 2.6% in 2019 compared with 2.9% previously.

Recent soft data releases from China further dampened investors’ appetite for risk, causing participants to increasingly take up short positions.

China’s Caixin composite purchasing managers’ index (PMI), which covers both manufacturing and services, slid to 51.5 in May from 52.7 in April. The Caixin services PMI dropped to 52.7 in May from 54.5 previously.

“Bearish sentiment arising from macroeconomic concerns is likely to subdue copper prices,” an analyst with Citic Futures Research said in a morning note.

“The trade tensions are expected to last for a while, resulting in thinner demand for copper amid weakened domestic investment and consumption [in China],” the analyst added.

The most-traded July copper contract price dropped to 45,890 yuan ($6,641) per tonne as at 10.14am Shanghai time, down 1.3% or 600 yuan per tonne from Wednesday’s close of 46,490 yuan per tonne.

Nickel gave a similarly weak performance this morning, with the metal’s most-traded July contract price falling by 1.4% to 95,030 yuan per tonne as at 10.14am Shanghai time.

“The demand outlook for stainless steel is worsening, which does not bode well for nickel usage if more mills turn to production cuts in an effort to reset the stainless steel market’s fundamentals, establish a price floor and restore their margins,” Fastmarkets MB analyst James Moore said.

Other highlights

  • Despite the considerable macroeconomic headwinds, zinc and lead managed to record marginal gains this morning. The most-traded July lead and zinc contracts were up by 0.5% and 0.4% respectively.
  • The dollar index edged up by 0.02% to 97.31 as at 10.51am Shanghai time.
  • In US data on Wednesday, the ADP non-farm employment change disappointed with the addition of just 27,000 new positions in May, well below the forecast 185,000 new positions added. The ISM non-manufacturing PMI was better than expected at 56.9 last month, up from 55.5 in April.
  • Data of note on Thursday includes the European Union’s revised gross domestic product reading, monetary policy statement from the European Central Bank as well as US releases that include Challenger job cuts, revised non-farm productivity and unit labor costs, trade balance and unemployment claims.
  • In addition, Bank of England governor Mark Carney and US Federal Open Market Committee member John Williams are speaking.
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