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The most-traded May zinc contract on the SHFE stood at 21,970 yuan ($3,277) per tonne as at 10.43am Shanghai time, up by 0.5% or 110 yuan per tonne from Wednesday’s close.
Providing broad support to the SHFE base metals complex was a softer US currency following a surprisingly dovish Federal Open Market Committee (FOMC) statement overnight.
The dollar index, at 95.88 as at 10.44am Shanghai time, has slipped below the psychological level of 96 and is down from 96.45 at a similar time on Wednesday.
“The Federal Reserve continued to release more doves overnight with the FOMC erasing more dots from its plot and removing any hikes in 2019, moving to just one in 2020,” Jeff Halley, senior market analyst at Oanda, said.
“[Federal Reserve chairman Jerome] Powell cited a weakening global economy, US-China trade and nervousness about the domestic economy for sitting on their hands. Somewhat confusingly, he then said that the US economy remains strong with wage growth and inflation where they should be. What is clear is that the Federal Reserve is now in a wait-and-see mode and will play what ends up in front of it,” Halley added.
Meanwhile, the US central bank cut its 2019 gross domestic product (GDP) forecast to 2.1% from the 2.3% it had projected at its meeting in December 2018, further weighing on the dollar.
Adding to the more risk-on tone in the market this morning was news that China’s finance ministry had issued draft legislation goals for 2019 that did not include property tax law.
“The property sector is a key sector for commodity demand, and rumors of new taxes had been weighing on sentiment. This helped by push most metals higher into the close, in particular zinc and nickel,” Kishti Sen, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.
In terms of fundamentals, the backdrop for zinc remains fairly positive; according to the International Lead and Zinc Study Group (ILZSG), the refined zinc market was in a deficit of 28,000 tonnes in January 2019.
“This is a contrast to the 5,000-tonne surplus in previous years and suggest that while metal usage has increased year on year, refined production has not,” Fastmarkets analyst Andy Farida said. Other highlights – Copper prices on the SHFE gave a similarly strong performance to that of zinc this morning, with the most-traded May contract on the exchange rising by 0.5% to 49,440 yuan per tonne as at 10.44am Shanghai time. – In equities, the Shanghai Composite was up 0.61% to 3,109.48 at 11.37am Shanghai time. – In European data on Wednesday, UK Consumer price index (CPI) in February stood at 1.9%, slightly above the previous and anticipated 1.8%.