LIVE FUTURES REPORT 09/07: Corrective rally underway across most SHFE base metals

Base metals, with the exception of lead, were all up on the Shanghai Futures Exchange during Asian morning trading on Monday July 9, with copper leading a corrective rally after weeks of selling.

Copper was the outperformer of the SHFE complex this morning, with the metal’s most-traded September contract rebounding to 49,800 yuan ($7,496) per tonne as at 10.40am Shanghai time, an increase of 720 yuan per tonne or 1.5% from last Friday’s close.

“After such a huge fall in metals prices, and indeed global equity markets, a corrective rally is not that much of a surprise and should have been expected at some point,” Malcolm Freeman, chief executive officer of Kingdom Futures, told Metal Bulletin.

“This does not mean that it’s time to celebrate then end of the bear run on the metals markets as the global economy is still in a very fragile state and it will require a return to higher growth levels to support a change in direction,” he added.

A softer dollar following the release of weaker-than-expected US wage growth at the end of last week further bolstered sentiment in the base metals market.

The dollar index dipped to 93.91 as at 11.09am Shanghai time, down from a high of 94.49 last Friday.

US wage growth – a closely watched inflation gauge – rose less than forecast in June. Average hourly earnings in the United States rose 0.2% last month, against an expected increase of 0.3%.

Job creation was robust, however, with non-farm payrolls rising by 213,000 jobs in June – 195,000 had been called for. Meanwhile, the data for April and May was revised upward by 37,000 (11,000 in May and 26,000 in April).

Declining copper stocks on the London Metal Exchange were also supportive to red metal prices.

LME copper inventories fell to 275,475 tonnes last Friday – the lowest since January.

Zinc was the second-best performer on the SHFE in the early session on Monday, with the metal’s most-traded August contract up by 1.3% as at 10.40am Shanghai time.

The rest of the complex was similarly stronger, with only lead bucking the trend.

Base metals prices

  • The SHFE September nickel contract price increased by 780 yuan per tonne to 111,760 yuan per tonne.
  • The SHFE August zinc contract price jumped by 280 yuan per tonne to 22,330 yuan per tonne.
  • The SHFE September aluminium contract price was up by 150 yuan per tonne to 14,160 yuan per tonne.
  • The SHFE September tin contract price rose by 950 yuan per tonne to 144,300 yuan per tonne.
  • The SHFE August lead contract price dipped by 80 yuan per tonne to 19,605 yuan per tonne.

Currency moves and data releases

  • The dollar index was down by 0.07% to 93.91 as at 11.09am Shanghai time.
  • In other commodities, the Brent crude oil spot price was up by 0.45% to $77.45 per barrel as at 11.12am Shanghai time.
  • In equities, the Shanghai Composite was up by 1.51% to 2,788.60 as at 11.11am Shanghai time.
  • In US data on Friday, the non-farm employment payroll change showed 213,000 Americans joined the workforce in June, compared with an expected 195,000. Average hourly earnings rose by 0.2% month on month last month, down from a 0.3% increase previously, while the unemployment rate rose to 4% from 3.8%.
  • In data today, we have the German trade balance, the EU’s Sentix investor confidence and consumer credit from the United States.
  • In addition, European Central Bank president Mario Draghi is speaking at the European Parliament Economic and Monetary Affairs Committee in Brussels.