LIVE FUTURES REPORT 20/08: SHFE nickel price drops 1%, others broadly up

Risk sentiment received a boost from news that the US government granted a temporary general license that permits companies in the US to sell products to Chinese tech giant Huawei on a limited basis. The renewal lasts for 90 days and went into effect on Monday.

Market participants have taken the development as a sign of progress in US-China trade negotiations, with sentiment recovering as a result.

“Signs of a truce in the US-China trade talks helped boost sentiment in commodity markets,” Daniel Been, analyst at ANZ Research, said in a morning note.

This comes after comments from US President Donald Trump said over the weekend that the US is “doing very well with China and talking”. But President Trump also suggested he was not ready to sign a deal with China which is likely to prevent investors from getting overly excited about the Huawei news.

Expected fiscal stimulus by governments around the world, which will have positive effect on the respective country’s credit growth and demand, has also supported an improvement in market sentiment, according to ANZ Research.

In the base metals, zinc was leading the gains on the SHFE this morning. The metal’s most-traded October contract rose to 18,625 yuan ($2,642) per tonne as at 9.56am Shanghai time, up by 85 yuan per tonne, or 0.5%, from Monday’s close of 18,540 yuan per tonne.

The galvanizing metal has found supported from a sharp drawdown in deliverable stocks at SHFE warehouses last week; stocks fell by 5,585 tonnes or 7% last week to total 73,857 tonnes on August 16.

Nickel was the worst performer of the SHFE base metals this morning. The most-traded October nickel contract declined to 124,750 yuan per tonne as at 9.56am Shanghai time, down by 1,160 yuan per tonne, or 1%, from Monday’s close of 125,910 yuan per tonne.

“The market has digested the optimism from the potential [bringing forward of the] Indonesian export ban on nickel ore,” an analyst from Citic Futures said.

“Even though the production at stainless steel mills is booming, the downstream stainless steel stock has shown a substantial increase, which might indicate the price has touched a ceiling”, the analyst added

Other highlights

• The dollar index was down by 0.04% to 98.32 as at 9.56am Shanghai time.
• In European data on Monday, the European Union’s current account figure for the July-August period was recorded at a surplus of €18.4 billion ($20.4 billion), missing an expected surplus of €32.2 billion and down from €30.3 billion the prior month.
• Elsewhere, the EU’s final consumer price index (CPI) year on year for the July-August period was lower than expected at 1%, missing an expected level of 1.1%. Meanwhile, final core CPI over the same period was in line with expectations at 0.9%.
• In data on Tuesday, the Confederation of British Industry’s industrial order expectations are of note.