LIVE FUTURES REPORT 08/10: SHFE copper price underperforms on China’s return from National Day holiday, others mixed

Base metals prices on the Shanghai Futures Exchange were mixed during the morning trading session on Tuesday October 8, the first trading day after China’s National Day holiday, with copper giving the worst performance of its peers amid a persistently weak macroeconomic backdrop.

“There was some disappointing economic data out during the holiday [October 1-7], and this has affected metals’ prices to some degree,” a Chinese broker told Fastmarkets.

The SHFE base metals exhibited mixed moves this morning as a result, with copper, aluminium and zinc drifting lower while the rest ticked upward.

Copper was the worst performer with the metal’s most-traded November contract sliding to 46,930 yuan ($6,564) per tonne as at 9.25am Shanghai time, a decline of 330 yuan per tonne - or 0.7% - from a close of 47,250 yuan per tonne on September 30, the last trading day before China’s National Day holiday.

“Copper is mainly being affected by the negative macro sentiment. The PMI [purchasing managers’ index] readings in September from Germany, Europe and the United States published [last week] were all near multi-year lows,” an analyst with Chinese brokerage Galaxy Futures said in morning notes.

“However, some new infrastructure projects will come online next year in China and this could offer some support to the copper price in the first half year next year,” the analyst added.

Furthermore, with trade talks between the US and China scheduled for Thursday and Friday this week, investors are adopting a fairly cautious approach to trade which is likely another reason behind the underwhelming performance of the SHFE base metals.

Shrugging off the sluggish start to the week was lead, which led on the upside following persistent drawdowns in exchange inventories.

Lead stocks at London Metal Exchange-listed warehouses totaled 69,100 tonnes on Monday, down from 77,525 tonnes on September 2. Deliverable lead stocks at SHFE warehouses stood at 15,506 tonnes on September 30, the lowest since December 2018, having contracted consistently since August.

The most-traded November lead contract on the SHFE rose to 17,195 yuan per tonne, up by 275 yuan per tonne - or 1.6% - from 16,920 yuan per tonne on September 30.

Other highlights

  • The dollar index, which gauges the strength of the US currency against a basket of foreign currencies, was up by 0.01% at 98.99 as at 9.25am Shanghai time.
  • A host of weak manufacturing PMI data for September from Europe was released last week. The United Kingdom’s manufacturing PMI for the September period was better than expected at 48.3 but still in contractionary territory. The German manufacturing PMI for the same month also beat expectations but at 41.7 is severely weak.
  • In other data last week, the US’ ISM manufacturing PMI slid to 47.8 in September from 49.1 previously.
  • In data on Tuesday, China’s Caixin services PMI fell to 51.3 from 52.1 previously.
  • Later, there is producer price data from the US as well as speeches by Federal Reserve Chair Jerome Powel and Bank of England Governor Mark Carney of note.
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