LIVE FUTURES REPORT 20/02: SHFE base metals prices mostly up on positive sentiment, soft dollar; lead, tin dip

Market sentiment improved after US President Donald Trump said trade talks with China were progressing well and hinted once again that the March 1 trade negotiations deadline may be pushed back.

Speaking to reporters in Washington DC on Tuesday, Trump said, “They are very complex talks. They’re going very well. I can’t tell you exactly about timing, but [March 1] is not a magical date. A lot of things can happen.”

At present, US tariffs on $200 billion worth of Chinese goods will be increased to 25% from 10% if an accord cannot be signed by March 1.

”Optimism around the trade deal has been a key reason behind the price recovery, so any failure in trade talks could again spook negative sentiment across the metals,” Jack Chambers, interest rate strategist and economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

Providing further support to the base metals was continued weakness in the US currency; the dollar index, at 96.50 as at 11.24am Shanghai time, is down from a high of 97.37 on Monday.

The weakness in the dollar comes ahead of the much-awaited release of the minutes from the US Federal Open Market Committee’s (FOMC) January meeting on Wednesday. Market participants will likely remain cautious ahead of this release, awaiting further clues as to the central bank’s monetary policy path for this year after it held rates steady last month and raised them four times in 2018.

“Markets await the FOMC minutes, due out tonight, and will be looking for more information about the recent shift to a more dovish tone. The minutes are expected to confirm a generalized absence of inflation pressures, global risks, and the proximity of the fed funds rate to neutrality,” ANZ’s Chambers said.

As a result of the friendlier macro backdrop for the base metals, the most-traded April copper contract on the SHFE climbed to 49,690 yuan ($7,342) per tonne as at 10.56am Shanghai time, up by 0.7% or 330 yuan per tonne from Tuesday’s close.

Nickel recorded similar gains this morning with a 0.9% rise, while aluminium and nickel rose more marginally with increases of 0.2% and 0.1% respectively. Tin and lead were slightly weaker, however.

Base metals prices

• The SHFE April zinc contract price climbed by 25 yuan per tonne to 21,460 yuan per tonne.
• The SHFE May nickel contract price rose by 900 yuan per tonne to 100,060 yuan per tonne.
• The SHFE April aluminium inched up by 20 yuan per tonne to 13,485 yuan per tonne.
• The SHFE March lead contract price was down by 60 yuan per tonne to 16,770 yuan per tonne.
• The SHFE May tin contract price was down by 130 yuan per tonne to 150,620 yuan per tonne.

Currency moves and data releases

• The dollar index was down 0.02% to 96.50 as at 11.40am Shanghai time.
• In equities, the Shanghai Composite was down 0.15% to 2,751.45 as at 11.30am Shanghai time.
• In data from the United Kingdom on Tuesday, the UK’s average earnings index, calculated on a three-month moving average compared with the same period a year earlier, was unchanged at 3.4% for the three months ended December 2018.
• The UK’s unemployment rate was flat at 4% for the same period, while the claimant count rose by 14,200 in January, more than expected 12,300 gain.
• In US data on Tuesday, the National Association of Home Builders’ (NAHB) housing market index was 62, above the forecast value of 59.
• European data due Wednesday includes the German producer price index (PPI), Confederation of British Industry (CBI) industrial order expectations and EU consumer confidence.
• In data from the United States, the FOMC will release the minutes from its January meeting later on Wednesday.