LIVE FUTURES REPORT 10/06: SHFE base metal prices supported by positive Chinese data, weak US dollar; Ni climbs 1%

Base metals prices, barring those for tin, on the Shanghai Futures Exchange were all up during morning trading on Monday June 10, with the complex broadly supported by the release of upbeat Chinese trade data and softness in the US dollar.

In data released on Monday morning, China’s dollar-denominated trade surplus stood at $41.7 billion in May, significantly higher than the expected $23.2 billion surplus that had been expected. In April, China’s overall trade surplus was $13.8 billion.

China’s dollar-denominated exports increased unexpectedly last month with a year-on-year rise of 1.1%, according to the country’s General Administration of Customs. This compares with a forecast year-on-year decline of 3.9%.

Meanwhile, Chinese dollar-denominated imports fell by 8.5% year on year in May, which easily outstripped the 3.5% drop that had been forecast.

Providing further support to the SHFE base metals this morning was a weakened US dollar.

The dollar index fell to a low of 96.45 on Friday following disappointing US payrolls data which fueled expectations of a cut in US interest rates. The index was recently up by 0.2% at 96.80 but still below the psychological level of 97.

“Markets immediately jumped on the dovish implications of the payrolls data and the fed funds futures strip rallied strongly, with the back end rallying 6-7bps, some analysts are calling for a Fed cut as soon as June,” analysts with ANZ Research noted on Monday.

Nickel was the best performer of the SHFE base metals on Monday amid short-covering activity during the Asian morning trading session, though overall sentiment toward nickel is still bearish after the alloying metal hit a one-month low at 94,280 yuan ($13,642) per tonne on June 6.

The most-traded July nickel contract on the SHFE was at 96,640 yuan per tonne as at 10.35am Shanghai time, up by 940 yuan per tonne, or 1%, from last Thursday’s close of 95,700 yuan per tonne.

“The mood among nickel analysts attending Fastmarkets’ seventh International Nickel conference in Amsterdam on Wednesday June 5 was unsurprisingly bearish,” Fastmarkets Analyst Andy Farida said.

“According to most analysts speaking at the conference, the decline in the LME nickel price will continue in the second half of 2019, with a 30% probability of a more bearish scenario where the nickel price could fall to $10,000 per tonne if the macroeconomic backdrop fails to improve,” Farida added.

Other highlights

  • Tin bucked the firmer showing exhibited by its peers; the most-traded September tin contract was littled changed to weaker at 143,250 yuan per tonne as at 10.35am Shanghai time.
  • The Shanghai Composite Index was up by 1% at 2,855.56 as at 11.30 am Shanghai time.
  • The US employment report out last Friday was largely disappointing; employers added just 75,000 new jobs to the US economy in May, far below last year’s monthly average of 223,000 positions. Average hourly earnings were up by 0.2% in May following a similar gain in April but this was lower than the expected 0.3% increase.
  • It is a light day for data today with bank holidays in Australia, France and Germany. Releases of note include manufacturing production, construction output and industrial production from the United Kingdom. US Jolts job openings are also due.