LIVE FUTURES REPORT 09/03: SHFE base metals prices plunge on disappointing Chinese trade data; Pb edges up 0.3%

With the exception of that for lead, base metals prices on the Shanghai Futures Exchange fell heavily during the morning trading session on Monday March 9 after investor confidence was hit by the release of poor Chinese trade data over the weekend.

Trade figures released by the Customs General Administration of China (CGAC) on Saturday showed that China’s dollar-denominated trade balance swung to a $7.1-billion deficit in the first two months of the year from a $46.8-billion surplus in December 2019.

China’s yuan-denominated trade balance stood at a deficit of 43 billion yuan ($6.2 billion) in January-February after the 329 billion surplus achieved in the final month of last year, according to the CGAC.

Chinese exports fell by double digits in the first two months of the year after government measures to prevent the spread of novel coronavirus (2019-nCoV) led to the shutdown of factories across the country early this year.

Customs data showed China’s exports slumped by 17.2% from a year earlier to $292.4 billion in January-February, a sharp reversal from the 7.8% year-on-year increase recorded in December 2019. Imports fell by a more marginal 4% to $299.5 billion over the same period after a gain of 16.3% previously.

Meanwhile, the rapid spread of the coronavirus throughout Europe and the United States continues to overhang risk sentiment amid fears of a global pandemic.

Italy has reported a total of 366 deaths as a result of the coronavirus outbreak with 7,375 confirmed infections. The rapid rise has led Italian authorities to impose a quarantine in Lombardy and other severely affected areas.

Elsewhere, markets are also reacting to a huge drop in oil prices overnight after the Organization of the Petroleum Exporting Countries (OPEC) failed to strike a deal regarding production cuts, causing Saudi Arabia to slash its export oil prices in a bid to recapture market share. Brent crude, the global benchmark, plunged by 22% to $35 a barrel in response.

“Complete pandemonium at the open as investors wake up shell shocked to the realization that last night’s risk meltdown nightmare wasn’t just a bad dream,” Stephen Innes, chief Asia market strategist at foreign exchange brokerage Axitrader, said in a note on Monday.

“Covid19 contagion dominates the market psychology… It sure seems inevitable that US virus headcount numbers will climb substantially higher from current levels, possibly in an explosive way, once testing is rolled out on a large scale. The oil market could remain under pressure for the foreseeable future until maybe Russia and the Saudis walk back their new world order for oil threat,” he added.

The negative backdrop caused the SHFE base metals to weaken significantly during morning trading on Monday.

Zinc was the worst performer of its complex in terms of percentage losses; the galvanizing metal’s most-traded May contract plummeted to 15,510 yuan ($2,237) per tonne at the close of the morning session, down by 545 yuan per tonne or 3.4% from 16,055 yuan per tonne.

Significant losses were also observed in June nickel at 100,000 yuan per tonne (-2.9%), May copper at 43,940 yuan per tonne (-2.4%), May aluminium at 12,910 yuan (-2%) per tonne and June tin at 134,060 yuan per tonne (-1.2%).

Lead was the sole metal that ended the morning session with a slight gain, with its April contract up by 40 yuan or 0.3% at 14,510 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, slumped 0.9% at 95.21 as at 11.30am Shanghai time. This compares with a reading of 96.58 at a similar time on Friday.
  • The Shanghai Composite Index had declined 2.4% at 2.961.29 as at 11.30 am Shanghai time.
  • It is a light day for data with Germany’s trade balance and industrial production as well as Sentix’ reading of investor confidence in the European Union of note.