LIVE FUTURES REPORT 20/03: Relief rally underway in SHFE base metals; Cu up 2%

Base metals prices on the Shanghai Futures Exchange were up across the board at the close of the morning trading session on Friday March 20, with the complex benefiting from the emergence of some modest optimism in broader markets.

This optimism following news on Thursday of more aggressive measures by governments and central banks in Europe and the United States to shore up economies hit by the novel coronavirus (2019-nCoV).

The US Federal Reserve announced on Thursday that it will establish temporary US dollar liquidity arrangements (swap lines) with other central banks around the world, including Australia, Brazil, Denmark, Korea, Mexico, Norway, New Zealand, Singapore and Sweden.

“These facilities, like those already established between the Federal Reserve and other central banks, are designed to help lessen strains in global US dollar funding markets, thereby mitigating the effects of these strains on the supply of credit to households and businesses, both domestically and abroad,” the US central bank said.

The US currency softened following the announcement; the dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.85% at 102.10 as at 12.10am Shanghai time. But this remains up from a reading of 101.39 at a similar time on Thursday.

In broader markets, US stocks managed to secure modest gains overnight, with the Dow Jones Industrial Average up by 0.95% or 188.27 points to 20,087.19 and the S&P 500 up by 0.47% or 11.29 points to 2,409.39.

Asian stock markets have followed suit this morning, with China’s Shanghai Composite Index up by 0.26% or 7.11 points to 2,709.24 as at 11.39am Shanghai time, while Hong Kong’s Hang Seng Index was up by 2.74% or 593.87 points to 22,303.

In the SHFE base metals, zinc gave the best performance of its peers in terms of percentage gains this morning. The most-traded May zinc contract was at 14,895 yuan ($2,099) per tonne at the close of morning trading, up by 3.3% or 475 yuan per tonne from Thursday’s close of 14,420 yuan per tonne.

Copper also secured a strong gain over Friday’s morning session, but this comes after it hit its daily down limit for two consecutive days. The most-traded May copper contract ended the morning session at 38,340 yuan per tonne, up by 770 yuan per tonne or 2.1% from Thursday’s close of 37,570 yuan per tonne.

“The market panic is easing slightly, which is helping the rally, but [the base metals] will remain sensitive to global headlines surrounding the coronavirus in the short term,” a Shanghai-based copper analyst said.

The recent dramatic decline in copper prices has caused physical trading in China to grind to a halt, with most leaving the market and taking a wait-and-see stance.

Gains were also seen in May lead at 13,240 yuan per tonne (+2.28%), June tin at 110,230 yuan per tonne (+1.89%), May aluminium at 11,970 yuan per tonne (+1.4%), and June nickel at 95,520 yuan per tonne (+0.28%).

Other highlights

  • The economic agenda is light on Friday but notable releases include German producer prices, the European Union’s current account, the United Kingdom’s consumer inflation expectations and public sector net borrowing as well as existing home sales from the US.