LIVE FUTURES REPORT 07/01: SHFE base metals prices broadly up, geopolitical tensions cap gains

Base metals prices on the Shanghai Futures Exchange were mostly up at the close of morning trading on Tuesday January 7, but continued geopolitical tensions between the United States and Iran limited the upward momentum.

With the exception of aluminium and zinc, the SHFE base metals all recorded marginal gains over the morning session. The most-traded March copper contract was the outperformer with a rise to 48,930 yuan ($7,014) per tonne, up by 170 yuan per tonne - or 0.4% - from Monday’s close of 48,760 yuan per tonne.

US President Donald Trump maintained hawkish rhetoric toward Iran at the start of this week, warning that he could target Iranian cultural sites should the Middle Eastern country retaliate following a US drone strike on January 3 that killed Iranian military commander Qasem Soleimani.

“The risk-off mood though did ebb slightly overnight with no new developments, while strong services PMIs from the UK, EZ and the US serve as a reminder that the global economy appears to be stabilizing as we start 2020,” Tapas Strickland, director of economics and markets at National Australia Bank, said in a note on Tuesday.

In data on Monday, purchasing managers’ index (PMI) data from Europe and the US was better than expected, helping to allay concerns arising from a poor reading out of China earlier in the day.

China’s Caixin services PMI fell to 52.5 in December from 53.5 previous and was also below an expected reading of 53.2. Elsewhere, the German, EU and UK services PMI for the same month exceeded forecasts at 52.9, 52.8 and 50.0 respectively. The US’ services PMI rose to 52.8 in December from 52.2.

In other data on Monday, Germany-based consulting firm Sentix’s reading of consumer sentiment in the euro zone jumped to 7.6 points from 0.7 points in December to reach its highest level since November 2018.

The raft of better-than-expected data provided a sufficient enough boost in sentiment for the majority of the other SHFE base metals to eke out marginal gains this morning.

The March nickel contract rose by 0.3% to 108,560 yuan per tonne, February lead gained 0.3% to 14,795 yuan per tonne and June tin increased by 0.2% to 134,850 yuan per tonne. February aluminium dropped by 40 yuan per tonne to 14,065 yuan per tonne while March zinc slid by 30 yuan per tonne to 18,080 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 0.04% at 96.67 as at 10.55am Shanghai time.
  • The Shanghai Composite Index was up by 0.36% at 3,094.44 as at 11.30 am Shanghai time.
  • In data on Tuesday, the EU’s core consumer price index flash estimate and retail sales are of note, as are the US’ Institute for Supply Management (ISM)’s non-manufacturing PMI, trade balance and factory orders.
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