LIVE FUTURES REPORT 18/01: SHFE base metals prices rally on easing US-China trade tensions; tin dips

There were strong gains in zinc, nickel and copper, with the three up by 2.2%, 1.2% and 1% respectively so far this morning. Aluminium and lead recorded more marginal gains, while tin was the sole metal to weaken – dropping by 0.1%.

Signs of progress being made in trade negotiations between the United States and China has provided a boost to risk appetite this morning, which has resulted in the more positive showing by the base metals.

There was greater optimism in the market following reports that the US is considering lifting tariffs on Chinese imports to ease market volatility and give Beijing reason to make deeper concessions in continuing negotiations between the two nations.

US Treasury Secretary Steven Mnuchin proposed lifting all or some of the tariffs, The Wall Street Journal (WSJ) reported on Thursday, citing people close to the matter.

But US Trade Representative Robert Lighthizer, however, is resisting the idea, worried that it could be considered a sign of weakness, the sources said.

Also on Thursday, China’s Ministry of Commerce announced that the country’s vice premier, Liu He, would visit the US at the end of January for trade talks, which further raised prospects of easing US-China trade tensions.

“At some point during the NY day [on Thursday] the WSJ reported that US Treasury Secretary Steven Mnuchin had discussed lifting some or all the current tariffs imposed on Chinese imports and had suggested offering a tariff rollback as a bargaining chip in the impending trade discussion with Liu He,” Bands Financial analyst John Browning said in a morning report.

“Working on the basis that there is no smoke without fire, it would seem to many that Lui He had extracted a high price for his attendance in Washington and sensing a further armistice in the trade war the Dow [Jones Industrial Average] rushed up 280 points before the report was roundly denied,” Browning added.

Zinc was the outperformer during morning trading and lead the complex higher with its active contract soaring 2.2% from yesterday’s closing, benefited from low inventory and money injection.

Zinc was the outperformer of the SHFE base metals on Friday morning, with the metal’s most-traded March contract rising to 47,870 yuan ($7,068) per tonne as at 10.02am Shanghai time, up by 490 yuan per tonne from Thursday’s close.

“[The] zinc price was higher mainly due to the combined reason of low inventory and money flooded to the market after the Chinese central bank lowed its reserved ratio for the financial market,” a zinc analyst in Shanghai.

Zinc stocks at SHFE-listed warehouses fell 956 tonnes to 26,942 tonnes in the week ended January 11, down from 44,524 tonnes in the week ended November 2, 2018.

Base metals prices

• The SHFE March copper contract climbed by 490 yuan per tonne to 47,870 yuan per tonne.
• The SHFE March aluminium contract increased by 35 yuan per tonne to 13,430 yuan per tonne.
• The SHFE March zinc contract soared by 450 yuan per tonne to 21,335 yuan per tonne.
• The SHFE February lead contract ticked up by 30 yuan per tonne to 17,680 yuan per tonne.
• The SHFE May nickel contract rose by 1,140 yuan per tonne to 93,960 yuan per tonne.
• The SHFE May tin contract dipped by 140 yuan per tonne to 147,850 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.01% at 96.05 as at 10.09am Shanghai time.
• In equities, the Shanghai Composite was up by 0.79 % to 2,579.76 as at 11.37am Shanghai time.
• In European data on Thursday, the euro area annual inflation rate was 1.6% in December 2018, down from 1.9% in the previous month.
• US data released on Thursday was more positive; the Philadelphia Federal Reserve’s manufacturing index rose to 17 in January, versus expected and prior readings of 11 and 9.4 respectively, while unemployment claims for the week ended January 12 were lower than expected at 213,000 – compared with the forecast 219,000.
• On Friday, the EU’s current account, UK retail sales and US releases including capacity utilization rate, industrial production and the University of Michigan’s consumer sentiment and inflation expectations are due.
• In addition, US Federal Open Market Committee John Williams is speaking.