LIVE FUTURES REPORT 16/01: SHFE base metal prices broadly strengthen after US, China sign trade deal; copper little changed

Base metals prices on the Shanghai Futures Exchange were broadly up at the close of the morning trading session on Thursday January 16, with market sentiment buoyed by the signing of a “phase one” trade agreement between China and the United States on Wednesday.

The deal, signed between Chinese Vice Premier Liu He and US President Donald Trump at the White House, includes a pledge from Beijing to buy at least $200 billion of US goods and services over the next two years and a commitment to not devalue its currency.

But broader concerns regarding the US keeping tariffs on some $360 billion of Chinese imports until the US presidential election in November has tempered some of positivity surrounding the signing of the deal.

“President Trump called the deal a ‘momentous step’, though in reality the agreement is more akin to a truce for 2020 given further tariff reductions are off the table until after the November Presidential elections,” Tapas Strickland, director of economics and markets at National Australia Bank, said in a note.

“US-China tensions are also likely to be an ongoing feature regardless of the occupant in the White House with leading-Democratic presidential candidate [Joe] Biden called many of the provisions in the deal as ‘vague, weak, or covered by previous announcements and existing agreements’,” Strickland added.

Meanwhile, market sentiment also received a boost from news that China’s central bank had injected a net 560 billion yuan ($81.2 billion) of liquidity into the country’s financial institutions this morning. The amount, the highest ever recorded for a single day, aims to boost the Chinese economy and ease the tightness of cash ahead of the Chinese New Year holidays on January 24-30.

In terms of the SHFE base metals, nickel was the outperformer after supply concerns resurfaced following Indonesia’s export ban on nickel ore coming into effect on January 1. The most-traded March nickel contract rose to 111,420 yuan per tonne at the close of morning trading, up by 2,280 yuan per tonne – or 2.1% – from Wednesday’s close of 109,140 yuan per tonne.

“Nickel prices rebounded strongly… as the focus was back to the tightening supplies after Indonesian export ban of nickel ore,” ANZ Research analyst Hayden Dimes said in a morning note.

Other gains were more tempered but still healthy; March aluminium rose by 1.3% to 14,145 yuan per tonne, March zinc ticked up by 0.3% to 18,285 yuan per tonne, March lead was up by 0.6% to 15,225 yuan per tonne and June tin increased by 0.6% to 140,430 yuan per tonne.

Copper was the lone metal in negative territory, albeit little changed from Wednesday’s close, while it contends with weakened demand in the run-up to Chinese New Year; the March copper contract dipped by 10 yuan per tonne to 49,250 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was unchanged at 97.2 as at 12.14pm Shanghai time.
  • The Shanghai Composite Index was down 0.28% at 3,081.38 at 12.14 am Shanghai time.
  • In US data on Wednesday, the core producer price index (PPI) – which indicated the change in price of finished goods sold by producers, excluding the food and energy sectors – on a month on month basis for the December-January period was lower than expected at a rise of 0.1%, while PPI over the same period was also recorded at 0.1%.
  • Elsewhere, US crude oil inventories fell by 2.5 million barrels, beating an expected climb by 400,000 barrels.
  • US releases out on Thursday include retail sales, the Philly Fed Manufacturing Index, import prices and unemployment claims.
  • In addition, US Federal Open Market Committee member Michelle Bowman and European Central Bank President Christine Lagarde are speaking.