LIVE FUTURES REPORT 19/10: Renewed concerns over slowing Chinese economy sinks SHFE base metals prices; nickel defiant

Nickel was the only base metal to show any gains this morning, with the metal’s most-traded January contract on the SHFE rising to 102,310 yuan per tonne as at 10.30am Shanghai time, up by 1,170 yuan per tonne from Thursday’s close.

The rest of the complex was mired by a rise in risk aversion following the disappointing release of gross domestic product (GDP) data from China earlier this morning, which heightened concerns that the ongoing trade spat between China and the United States is affecting growth in the two nations.

In data on Friday, China’s economic growth slowed more than expected in the third quarter of this year to the weakest pace since the first quarter of 2009. The world’s second-largest economy grew by 6.5% year on year in July-September, which missed expectations of 6.6% growth. The latest reading was also lower than the 6.7% year-on-year growth seen in the previous quarter.

On a quarter-on-quarter basis, the Chinese economy grew by 1.6% in the third quarter – meeting expectations but lower than the previous quarter’s expansion of 1.8%.

The slower growth in China added to the negative sentiment pervading the market this market following the poor performance in US equity markets overnight.

“US equities continued to sink, following weakness through the Asian session, as markets continue to digest the combination of higher US rates, ongoing trade tension and Chinese growth concerns,” ANZ Research noted on Friday.

Asian equities were similarly weaker this morning, with the Shanghai Composite slid to 2,460 earlier on Friday, but has recovered to just below 2,500.

In copper, prices also continue to be pressured by low purchasing activity by downstream participants; the most-traded December copper on the SHFE dipped 80 yuan per tonne to 49,900 yuan per tonne as at 10.30am Shanghai time.

In the physical market, Shanghai copper premiums retreated this past week on rising inflows of the metal into the country and a closed import arbitrage window. After reaching a three-year high of $110-115 per tonne at the end of September, the copper cathode premium on a cif Shanghai basis has largely been on a downward trajectory – reaching $90-103 per tonne on Thursday.

“In the Chinese domestic market, with downstream buying interest fading, the discount offered against the SHFE copper contract has expanded which is putting pressure on copper prices,” Chinese broker Guotai Junan said on Friday.

Base metals prices

• The SHFE December copper contract edged lower by 80 yuan per tonne to 49,900 yuan per tonne.
• The SHFE December aluminium contract slid by 55 yuan per tonne to 14,085 yuan per tonne.
• The SHFE November zinc contract was lower by 135 yuan per tonne to 22,325 yuan per tonne.
• The SHFE January nickel contract rose by 1,170 yuan per tonne to 102,310 yuan per tonne.
• The SHFE November lead contract was down by 145 yuan per tonne to 18,355 yuan per tonne.
• The SHFE January tin contract slipped by 1,120 yuan per tonne to 146,410 yuan per tonne.

Currency moves and data releases

• The dollar index was little changed at 95.95 as at 10.51am Shanghai time.
• In other commodities, Brent crude oil was up by 0.19% to $79.50 per barrel at 10.52 am Shanghai time.
• In equities, the Shanghai Composite was up 0.44% to 2,497.28 at 10.50 am Shanghai time, but still below 2500.
• In US data on Thursday, the Philly Fed manufacturing index at 22.2 beat the forecast of 19.7, while weekly unemployment claims stood at 210,000, broadly flat with the forecast 211,000. The CB leading index at 0.5% was as forecast.
• The economic agenda is fairly light today after Chinese quarterly GDP date released, with Canada’s monthly CPI and core retail sales data due today.
• The economic agenda is fairly light today with data already out showing Chinese quarterly GDP that was lower than expected, fixed asset investment which was slightly better than expectations at 5.4% and industrial production that disappointed with a reading of 5.8%.
• Later, we have US existing home sales of note.
• In addition, US Federal Open Market Committee member Raphael Bostic and Bank of England governor Mark Carney are speaking.