LIVE FUTURES REPORT 07/11: SHFE base metals prices down on skepticism over US-China trade settlement rhetoric

Base metals prices on the Shanghai Futures Exchange were down across the board during Asian morning trading on Wednesday November 7, as skepticism once again washed over positive sentiment brought on by Chinese President Xi Jinping’s promise to open the country’s economy to the world and Vice-President Wang Qishan’s announcement that China is ready to engage with the United States to resolve their trade war.

“China continues to hint at promoting domestic growth and implied that the government is ready to do what it takes to support the Chinese economy and businesses. Still, such policies will take time to come to fruition — the main stumbling block to growth remains the simmering trade war with the US, which is unlikely to end any time soon,” Fastmarkets analyst Andy Farida said.

The ongoing conflict between the two major economies has rattled investor confidence this year, with sensitivity to the slightest hint of a prolonged US-China trade war quickly undermining gains seen in the base metals complex.

Zinc continued its downward trend, with its most-traded December contract falling 1% to 21,455 yuan ($3,099.81) per tonne.

According to Fastmarkets analyst James Moore, while the global refined zinc market is expected to hit a deficit of 322,000 tonnes this year, up from the forecast of 263,000 tonnes last May, “downstream signals from the automotive and construction sectors, while supportive overall, have shown signs of slowing”.

He noted that global light vehicle sales in September dropped 8.5% year on year. January-September sales were up by a modest 1.7%, compared with the 3.5% growth seen in January-June, he added.

Similarly, for nickel, despite falling stocks, negative macro-economic conditions continued to hurt this market. Nickel’s most-traded January contract price fell 0.6% to 97,820 yuan per tonne.

“The market lacks bullish conviction and the reaction from the base metals is to adhere to the prevailing downtrend for now,” Farida said.

Base metals prices

  • The SHFE January nickel contract was down 630 yuan per tonne to 97,820 yuan per tonne.
  • The SHFE December zinc contract dropped 215 yuan per tonne to 21,455 yuan per tonne.
  • The SHFE December lead contract fell 110 yuan per tonne to 18,310 yuan per tonne.
  • The SHFE January tin contract was down 70 yuan per tonne to 145,880 yuan per tonne.
  • The SHFE December copper contract decreased 330 yuan per tonne to 49,410 yuan per tonne.
  • The SHFE January aluminium contract declined 60 yuan per tonne to 13,855 yuan per tonne.

Currency moves and data releases

  • The dollar index was relatively unchanged at 96.14 as at 9.17am Shanghai time.
  • In equities, the Shanghai Composite Index rose 0.06% to 2,660,82 as at 11.06am Shanghai time.
  • In European data Tuesday, the Eurozone economy grew at its slowest rate since 2016, with the Eurozone PMI Composite Output Index at 53.1.
  • In the US, the US Bureau of Labor Statistics reported on Tuesday that the amount of US job openings in September fell to 7.0 million, after reaching 7.3 million in August. This outnumbers the amount of unemployed people in the US. The amount of new jobs in construction reached 278,000, up by 55% since September 2017.
  • Today, Germany is releasing data on industrial production, while Italy and the Eurozone are publishing reports on retail sales.
  • In the UK, the Halifax Bank of Scotland is expected to release data on the House Price Index.