LIVE FUTURES REPORT 11/04: Mixed economic outlook, firm dollar cap SHFE base metals prices; Pb slides 1.2%

Lead prices on the Shanghai Futures Exchange retreated during morning trading on Thursday April 11, tracking the weakness seen on the London Metal Exchange at the close of trade on Wednesday.

The most-traded May lead contract on the SHFE slid to 16,485 yuan ($2,454) per tonne as at 10.11am Shanghai time, down by 200 yuan per tonne or 1.2% from Wednesday’s close of 16,685 yuan per tonne.

Lead’s performance on the SHFE this morning follows a similarly weak showing on the LME yesterday, when the three-month lead price closed down by 1.5% at $1,953 per tonne despite a continued drawdown in LME stocks.

The other base metals traded on the SHFE were also down during morning trading on Thursday, but to lesser degrees compared with lead. This broad-based weakness comes amid lingering risk-off appetite among investors due to a mixed economic outlook and firm US dollar.

“Investors struggled to makes sense of the conflicting signals in the market. Falling inventories across many markets suggest tightness; however, the economic data remains mixed… The China Passenger Car Association said that retail sales of vehicles fell 12% to 1.78 [million] units in March. That follows an 18.5% fall in February. This comes amid warnings from various groups regarding economic growth, including the [International Monetary Fund] who cut its growth forecast for the global economy earlier this week,” Jack Chambers, interest rate strategist and economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

Chinese data out on Thursday was more positive, however; China’s consumer price index (CPI) recorded a year-on-year rise of 2.3% in March, in line with expectations but up significantly from the 1.5% year-on-year gain recorded in the prior month, according to data from China’s National Bureau of Statistics. It was the fastest pace since October 2018.

The county’s producer price index (PPI) rose by 0.4% in March from a year ago, which was flat with forecasts but up from the 0.1% year-on-year increase recorded in February.

Yet a firm US dollar continues to deter commodity investment.

The dollar index, which measures the value of the US dollar against a basket of foreign currencies, softened slightly overnight following the release of the minutes from the US Federal Open Market Committee’s March meeting but the index continues to hover near the psychological level of 97.

The dollar index was at 96.93 as at 10.12am Shanghai time, up from its close of 96.91 on Wednesday.

“[The] FOMC minutes reiterated the [Federal Reserve’s] earlier messaging, with a number of officials noting rates could go up or down. Minutes suggest Fed officials are comfortable that the US economy can weather slowing global growth, but patience is paramount,” ANZ’s Chambers said.

Other highlights

  • Nickel was the second worst performer on the SHFE this morning, with the metal’s most-traded June contract dropping by 0.6% or 590 yuan per tonne to 102,720 yuan per tonne as at 10.11am Shanghai time.
  • In European data on Wednesday, the United Kingdom’s gross domestic product figures for March were in line with expectations at a month-on-month gain of 0.2%, but down from last month’s figure of 0.5%. The country’s manufacturing production level over the same period beat expectations at 0.9%, but fell from last month’s level of 1.1%.
  • In addition, the European Central Bank set its main refinancing rate at 0.00%, unchanged from previously.
  • In data on Thursday, PPI and unemployment claims are due from the United States.
  • In addition, FOMC members Richard Clarida, John Williams and James Bullard are speaking.