LIVE FUTURES REPORT 14/09: SHFE base metals prices mixed on disappointing US economic data, uncertainty over trade talks

Trump’s tweet on Thursday, stating the US is under no pressure to make a deal with China, marred the budding positive sentiment generated by Washington’s gesture to resume top-level trade talks with Beijing.

“The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?” Trump said.

Meanwhile, the dollar and US Treasury yields took a hit from the disappointing consumer price index (CPI) data released on Thursday. The US currency slid to 94.55 as at as at 9am Shanghai time, down from 94.81 at roughly the same time on Thursday. Headline and core CPI stood at 0.2% and 0.1%, respectively, lower than the forecasts of 0.3% and 0.2%.

Market participants were reminded of how fragile and volatile world economies have been this year as markets grapple with the exchange of rhetoric between the US and China – made more tenuous by President Trump’s incendiary remarks. Consequently, as much as the resumed talks had lifted hopes of a possible end to the trade war, many participants are wary of the two parties’ willingness to offer and accept concessions.

Base metals prices were split into two camps on Friday morning, with aluminium leading the gains with a 0.6% increase in its most-traded November contract. The continued drawdown of stocks both in the London Metal Exchange- and SHFE-approved warehouses suggest growing tightness in the aluminium market, Metal Bulletin Research noted.

Market sources pointed out that the biggest uncertainty hanging over the aluminium market is the US sanctions on Russian producer Rusal. Many participants are increasingly doubting the possibility of the sanctions being lifted next month with both the US currently engaged in campaign activities for the midterm November elections.

The two other metals that registered gains today were lead, with its most-traded October contract up 0.4%, and tin, with a marginal increase of 0.1% for its most-traded January contract.

Zinc was the worst performer of the complex, with its most-traded November contract dropping 0.6%. Copper suffered a decline of 0.2% for its most-traded November contract, while nickel’s most-traded November contract fell 0.1%.

“Lingering trade jitters continue to underpin buying interest in the base metals complex and market participants do not have enough confidence to take on a more aggressive stance even at this heavily-discounted price,” Metal Bulletin analyst Andy Farida said.

Base metals prices

• The SHFE November nickel contract was down 50 yuan ($7) per tonne to 103,840 yuan per tonne.
• The SHFE November zinc contract dropped 115 yuan per tonne to 20,745 yuan per tonne.
• The SHFE October lead contract increased 65 yuan per tonne to 18,900 yuan per tonne.
• The SHFE January tin contract was up 120 yuan per tonne to 144,510 yuan per tonne.
• The SHFE November copper contract fell 90 yuan per tonne to 48,530 yuan per tonne.
• The SHFE November aluminium contract rose 85 yuan per tonne to 14,590 yuan per tonne.

Currency moves and data releases

• The dollar index was relatively unchanged at 94.55 as at 9am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $78.41 per barrel as at 9am Shanghai time.
• In equities, the Shanghai Composite fell 0.15% to 2,682.62 as at 11am Shanghai time.
• In US data on Thursday, weekly unemployment claims were better than expected at 204,000, below the estimate of 210,000. The headline and core CPI both disappointed with prints of 0.2% and 0.1% respectively – readings of 0.3% and 0.2% had been forecast.
• In European data on Thursday, German final CPI month-on-month for the August-September period was flat across the board at 0.1%, while French final CPI in the same period was recorded at 0.5%, unchanged from the previous figure and in line with expectations.
• In Chinese data on Friday, fixed asset investment slowed to 5.3% in the first eight months of the year, below a forecast of 5.5% and matching a record low in January-July. The country’s industrial output grew by 6.1% year on year in August, while retail sales rose by 9% in the same comparison, both beating expected increases of 6% and 8.8% respectively.
• US releases expected later on Friday, include core and headline retail sales, import prices, capacity utilization rate, industrial production, business inventories and University of Michigan consumer sentiment and inflation expectations.
• In addition, Bank of England governor Mark Carney is speaking at the Whitaker Lecture in Dublin, Ireland, at 11am London time.