LIVE FUTURES REPORT 07/09: SHFE base metals prices mixed; possible escalation in US-China trade tensions fuels risk-off sentiment

The mixed performance by the base metals comes amid heightened risk-off sentiment in the market with the public consultation in respect of the United States’ plans to implement tariffs on a further $200 billion worth of Chinese goods coming to an end on Thursday.

The Chinese Ministry of Commerce said on Thursday that it would take retaliatory action should the US proceed with the implementation of fresh tariffs against China.

Though there has been no word yet on whether US President Trump will go ahead with his plans for further tariffs, the possibility of an escalation in the US-China trade war has made market participants wary this morning, with trade choppy as a result.

Aluminium dipped this morning, despite the high prices of its raw material alumina, with the negative mood in the market dampening investors’ appetite for the light metal.

Aluminium’s most-traded November contract on the SHFE slipped to 14,665 yuan per tonne as at 10.09am Shanghai time, down by 0.1% or 20 yuan per tonne from Thursday’s close.

There was growing pessimism in the market regarding the upcoming announcement of tariffs against China from President Trump, according to Metal Bulletin aluminium analyst Yang Cao.

In addition, the expectation of weaker demand for aluminium in the coming months also put downward pressure on prices.

“Market participants think demand won’t be as strong in the coming days, which also sparked some negativity in the market,” according to an analyst with Guotai Junan Futures.

Zinc was the outperformer of the SHFE base metals this morning, with the metal continuing to find support from low inventory levels; SHFE zinc stocks totaled 29,936 tonnes on August 31, with stocks down 61% or 47,447 tonnes from 77,383 tonnes on January 5.

Zinc’s most-traded October contract on the SHFE climbed 130 yuan per tonne to 21,260 yuan per tonne as at 10.09am Shanghai time, marking a 0.6% increase from Thursday’s close.

Base metal prices

• The SHFE November copper contract moved up 220 yuan per tonne to 47,710 yuan per tonne.
• The SHFE November aluminium contract dropped 20 yuan per tonne to 14,665 yuan per tonne.
• The SHFE October zinc contract soared 130 yuan per tonne to 21,260 yuan per tonne.
• The SHFE October lead contract was up 15 yuan per tonne to 18,610 yuan per tonne.
• The SHFE November nickel contract slipped 10 yuan per tonne to 102,750 yuan per tonne.
• The SHFE January tin contract fell 260 yuan per tonne to 144,230 yuan per tonne.

Currency moves and data releases

• The dollar index was slightly up by 0.01% at 95.04 as at 10.08 am Shanghai time.
• In other commodities, Brent crude oil was down 0.21 % at $76.47 per barrel as at 10.08 am Shanghai time.
• In equities, the Shanghai Composite declined 0.13 % to 2,688.13 as at 11.34 am Shanghai time.
• In US data on Thursday, in a preview of Friday’s jobs report, the ADP non-farm employment change showed 163,000 Americans joined the labor market, below estimates of a gain of 195,000. Non-farm productivity increased by 2.9% in the second quarter, while unit labor costs dipped 1%. Weekly unemployment claims came in at 203,000, which was slightly better than an expected 214,000.
• The final services purchasing managers’ index (PMI) disappointed with a print of 54.8, missing an expected and previous print of 55.2. The ISM non-manufacturing PMI, however, surprised to the upside with a reading of 58.5, which was significantly high than forecast and previous readings of 56.8 and 55.7 respectively.
• US crude oil inventories declined by 4.3 million barrels in the week ended August 31, compared with an expected drop of 2.2 million barrels.
• In data today, we have industrial production and trade balances from Germany and France, Italian retail sales, the Halifax house price index and consumer inflation expectations from the United Kingdom and the European Union’s revised gross domestic product.
• US releases out later on Friday include average hourly earnings, non-farm employment change and unemployment rate.
• The tentative releases of China’s trade balances are scheduled for Saturday.