LIVE FUTURES REPORT 17/01: SHFE base metals prices mixed amid trade uncertainty; Ni drops 2.1%

Base metals prices on the Shanghai Futures Exchange were on divergent paths at the close of the morning trading session on Friday January 17, with lingering trade uncertainty broadly pressuring the complex.

While nerves have eased somewhat after the world’s two largest economies signed a preliminary trade agreement on Wednesday, uncertainty regarding a second phase agreement and the fact that the US is keeping tariffs on some $360 billion of Chinese imports until the US presidential election in November has tempered the positive tone in global markets.

“Although the signing of phase one of the trade deal took the concern off the market, uncertainty on phase two and tariff reductions again gripped the market,” ANZ Research analyst John Bromhead said in a note this morning.

“Industrial metals could not hold their gains, as the market still seems to be measuring the implications of the trade deal,” he added.

Market participants were also cautious this morning following the release of a slew of Chinese economic that showed year-on-year declines in the country’s gross domestic product (GDP), retail sales and industrial production – see other highlights below.

But China’s National Bureau of Statistics (NBS) said the economy was generally stable in 2019 with the main projected targets for development achieved, despite the easing. The NBS also said that the economy faces mounting downward pressure, and the country will take coordinated steps to ensure steady economic growth.

In terms of the SHFE base metals, nickel was the clear underperformer with its most-traded March contract dropping to 111,210 yuan ($16,157) per tonne at the close of morning trading on Friday, down by down by 2,310 yuan per tonne - or 2.1% - from Thursday’s close of 108,900 yuan per tonne.

This follows similar weakness in on the London Metal Exchange on Thursday, when the three-month nickel price plunged by 3.5% to close at $13,775 per tonne, losing more than $650 per tonne from an intraday high of $14,435 per tonne.

Elsewhere, June tin rose by 0.4% to 140,220 yuan per tonne, March zinc edged up by 0.2% to 18,325 yuan per tonne, while March copper was unchanged at 49,200 yuan per tonne, March aluminium dipped by 0.1% to 14,285 yuan per tonne and March lead fell by 0.9% to 15,160 yuan per tonne.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, changed little at 97.30 as at 11.33am Shanghai time.
  • In data already out on Friday, China’s year-on-year GDP growth stood at 6.1% in 2019, down from 6.6% in 2018, according to NBS data. The country registered industrial output growth of 5.7% last year, compared with 6.2% in 2018. Fixed-asset investments expanded by 5.4% year on year in 2019, versus 5.9% for the previous year. Retail sales increased by 8.0% year on year in 2019, down from 9.0% growth in 2018, the NBS said.
  • Data of note scheduled for later on Friday include the European Union’s consumer price index (CPI), United Kingdom retail sales and a slew of US releases including building permits, housing starts, industrial production, JOLTS job openings and the University of Michigan’s consumer sentiment and inflation expectations.
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