LIVE FUTURES REPORT 18/09: SHFE base metals prices drift ahead of FOMC rate decision, statement

Base metals prices on the Shanghai Futures Exchange were mostly down but overall little changed during the morning trading session on Wednesday September 18, with only aluminium and nickel registering gains.

Further soft data readings out of China and the conclusion of the US Federal Open Market Committee (FOMC) meeting later on Wednesday have seen investors maintain a cautious approach to trading so far.

China’s new home prices growth slowed to 8.8% in August from the 9.7% gain in July, marking the weakest pace since October 2018, according to data from the National Bureau of Statistics released on Tuesday.

The latest data follows disappointing industrial production and retail sales from China at the start of the week, with the base metals coming under pressure as a result.

The most-traded November Copper contract on the SHFE slid to 47,230 yuan ($6,661) per tonne as at 9.35am Shanghai time, down by 110 yuan per tonne – or 0.2% – from Tuesday’s close of 47,340 yuan per tonne.

The FOMC’s rate decision and statement remain Wednesday’s key events, with the central bank widely expected to cut rates by 0.25% to 1.75-2.00%. But market participants will be eagerly awaiting clues as to the FOMC’s plans for future rate adjustments, especially after Chairman Jerome Powell described a previous rate cut in July as a “mid-cycle adjustment”, meaning it was not part of a larger rate cutting cycle.

“Before the FOMC meeting on Thursday, it’s likely that the metals complex will exhibit limited changes, as investors are all waiting for the outcome [of the meeting],” a Shanghai-based analyst said.

Tin was the worst performer of the SHFE base metals complex this morning, with the metal’s most-traded January contract dropping to 137,200 yuan per tonne as at 9.35am Shanghai time, down by 490 yuan per tonne – or 0.4% – from Tuesday’s close.

“The fundamentals for tin remain weak. The decline in Myanmar’s tin exports are supportive of prices, but at the same time weak demand in China is offsetting this,” analysts with Chinese brokerage Citic Futures said in a morning note.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.06% at 98.28 as at 9.35am Shanghai time.
  • The Shanghai Composite index was up by 0.2% to 2984.11 as at 10.25am Shanghai time.
  • In European data on Tuesday, the German ZEW Economic Sentiment index for the August-September period was better at a reading of -22.4 – with a level above 0 indicating economic optimism – up from -43.6 the month prior.
  • US data on Tuesday was similarly better than expected; the country’s latest capacity utilization rate, industrial production and NAHB Housing Market Index all came in higher than analysts’ predictions at 77.9%, 0.6% and 68 respectively.
  • In data on Wednesday, consumer price index (CPI) data is due from the European Union and United Kingdom, while US releases including building permits, housing starts and crude oil inventories are also of note.