LIVE FUTURES REPORT 22/01: Macro concerns pressure SHFE base metals prices; tin most resilient

In a reversal of Monday’s moves, most SHFE base metals prices weakened after market sentiment turned more bearish on renewed concerns of a slowdown in the world’s second-largest economy – exhibited in Chinese data on Monday that showed the country’s gross full-year 2018 gross domestic product (GDP) grew at 6.6%, the slowest since 1990.

Sentiment suffered further overnight after the International Monetary Fund (IMF) downgraded its forecast for global growth for 2019, the second such reduction in three months. The latest forecast now stands at 3.5%, down from 3.7% last October.

“Downgrades within the Eurozone, to France and Italy but more significantly Germany – Europe’s ‘growth engine’ – and by a chunky 0.6%, are largely responsible for the downgrade, as too Turkey in the Emerging Markets universe,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, said.

“As well as the downgrade, the IMF sees the balance of risks to its outlook skewed to the downside, citing trade tariffs, a renewed tightening of financial conditions, a “no deal” Brexit and a deeper-than-anticipated slowdown in China,” Attrill added.

As a result this gloomier outlook, market sentiment has deteriorated and SHFE base metals prices have weakened. Tin has shown the most resilience against the challenging macroeconomic backdrop and was the only metal to secure any meaningful gains with a rise of 0.8%.

At the other end of the spectrum, aluminium recorded the biggest loss of the SHFE complex so far this morning; the light metal’s most-traded contract sliding to 13,435 yuan ($1,977) per tonne as at 10.03am Shanghai time, down by 100 yuan per tonne or 0.7% from Monday’s close.

Aluminium market participants continue to content with uncertainty surrounding when US sanctions against Russian aluminium producer UC Rusal may be lifted, and when the producer’s material may hit the market again.

In China, signs that the government’s “looser” aluminium winter cuts have had limited effect on curbing production are a further bearish factor for the light metal.

Base metals prices

• The SHFE March copper contract declined by 220 yuan per tonne to 47,580 yuan per tonne.
• The SHFE March aluminium contract dropped by 100 yuan per tonne to 13,453 yuan per tonne.
• The SHFE March zinc contract fell by 90 yuan per tonne to 21,330 yuan per tonne.
• The SHFE February lead contract ticked down by 25 yuan per tonne to 17,690 yuan per tonne.
• The SHFE May nickel contract rose by 60 yuan per tonne to 95,040 yuan per tonne.
• The SHFE May tin contract soared by 1,190 yuan per tonne to 149,160 yuan per tonne.

Currency moves and data releases

• The dollar index was unchanged at 96.33 as at 10.03am Shanghai time.
• In equities, the Shanghai Composite was up by 0.67% to 2,593.13 as at 11.06 am Shanghai time.
• In European data on Monday, Germany’s producer price index decreased by 0.4% in December 2018 compared with the prior month – larger drop than the forecast 0.1% decline.
• In data today, the Bank of Japan will announce its core consumer price index and release its outlook report and monetary policy statement.
• European data due for release on Tuesday includes the UK’s average earnings index, public sector net borrowing, unemployment rate, claimant count change, while Germany-based think tank ZEW will release its reading of economic sentiment.