LIVE FUTURES REPORT 20/07: Firm dollar, trade tensions pressure SHFE base metals prices; copper down 0.8%

Base metals prices on the Shanghai Futures Exchange were under pressure during Asian morning trading on Friday July 20, with the majority of the complex little changed to weaker. Tin was the exception, however, with a modest gain of 0.4%.

Copper led the on the downside with its most-traded September contract on the SHFE falling to 48,250 yuan ($7,133) per tonne as at 9.38am Shanghai time, down by 0.8% or 420 yuan per tonne from Thursday’s closing price.

This morning’s generally weaker tone follows a poor performance on the London Metal Exchange on Thursday, when the base metals all ended the day lower amid ongoing trade disagreements between the United States and other major economies and an uptick in the dollar.

Despite the dollar having softened after reaching a fresh 2018 high on Thursday, it remains in high ground which is dampening investor appetite for the base metals.

The dollar index, recently at 95.23, had reached a high on Thursday at 95.66 – its highest since July 2017. The index remains considerably higher than its recent low of 93.71 reached on July 9.

Persistent concerns over an escalating global trade war added further downward pressure to the base metals, with China’s Ministry of Commerce saying on Wednesday that it would have to take further measures to compensate for losses caused by the US’ Section 232 tariffs.

A war of words between the two nations intensified on Thursday with China saying claims made by a senior White House official that Chinese President Xi Jinping was responsible for blocking progress on a deal to avert a trade war were “shocking” and “bogus”.

“Base metals suffered under another bout of selling, as a combination of a strong USD and further escalation in the trade tensions ensured investors remained bearish,” ANZ Research noted on Friday.

“Given the negative macro sentiment and downside pressure, sellers remain in control of the complex,” Metal Bulletin analyst Andy Farida said.

In tin, supply concerns from Myanmar have kept prices well supported despite the negative backdrop facing the entire base metals complex. Gains were mild, however.

Base metals prices

  • The SHFE September nickel contract gained 10 yuan per tonne to 109,060 yuan per tonne.
  • The SHFE September zinc contract was up 35 yuan per tonne to 21,160 yuan per tonne.
  • The SHFE August lead contract dipped 105 yuan per tonne to 18,835 yuan per tonne.
  • The SHFE September tin contract increased 650 yuan per tonne to 145,130 yuan per tonne.
  • The SHFE September aluminium contract slid 20 yuan per tonne to 14,045 yuan per tonne.

Currency moves and data releases

  • The dollar index was up 0.07% to 95.23 as at 9.38 am Shanghai time.
  • In other commodities, the Brent crude oil spot price slid 0.07% to $72.46 per barrel as at 9.38am Shanghai.
  • In equities, the Shanghai Composite was down by 0.52% to 2,758.24 as at 10.08am Shanghai time.
  • In US data on Thursday, jobless claims came to 207,000 for the week ended July 14, a decrease of 8,000 from the prior week. The Philadelphia Fed Manufacturing Index for July stood at 25.7, surpassing an expected print of 21.6, and the Conference Board Leading Index increased 0.5% in June to 109.8, following no change in May and a 0.4% increase in April.
  • It is a light day for data on Friday with the German producer price index, the European Union’s current account and public sector net borrowing from the United Kingdom of note.
  • Looking ahead to the weekend, the financial leaders of the world’s 20 biggest economies will meet in Buenos Aires, Argentina.