LIVE FUTURES REPORT 24/01: China’s stimulus measures provide slight support to most SHFE base metals

The SHFE base metals complex moved within narrow ranges on Thursday morning with copper and zinc recording slight losses, while the rest were up marginally.

The slightly more positive performance by the SHFE base metals comes amid an uptick in market sentiment following moves by the People’s Bank of China (PBOC) to boost liquidity to encourage lending among banks.

“Moves by China’s central bank to support growth boosted sentiment in the base metals sector. It offered RMB257.5 billion ($37.7 billion) of liquidity to encourage banks to lend to small businesses. This comes ahead of the second RRR cut which takes effect on [January 25],” ANZ Research said in a morning note.

The central bank injected the sum via its targeted medium-term lending facility (TMLF).

“The appropriate scale of TMLF operations by the central bank will facilitate the transmission of wide credit, and the Ministry of Finance will study larger tax cuts and more obvious reductions,” an analyst with Guotai Junan Futures noted.

But the positivity stemming from China’s recent stimulus measures continues to be overshadowed by lingering concerns regarding US-China trade negotiations and fears of slowing global economic growth, capping the gains seen in the SHFE base metals this morning.

Tin was the star performer of the SHFE base metals complex, with the metal’s most-traded contract on the SHFE rising by 0.7% or 1,060 yuan per tonne to 148,410 yuan per tonne as at 10.24am Shanghai time.

The tin market remains underpinned by disruptions to shipments from Indonesia, tin’s second-largest global exporter. State-owned Indonesian company PT Timah remains the only entity able to export material from the country, but most of its business is tied up in long-term deals.

Since the stoppage in exports began in October 2018, European tin premiums have risen by more than 30%.

Base metals prices

• The SHFE March copper contract dropped by 190 yuan per tonne to 47,350 yuan per tonne.
• The SHFE March aluminium contract inched up by 45 yuan per tonne to 13,565 yuan per tonne.
• The SHFE March zinc contract dipped by 60 yuan per tonne to 21,535 yuan per tonne.
• The SHFE March lead contract ticked up by 75 yuan per tonne to 17,630 yuan per tonne.
• The SHFE May nickel contract edged up by 230 yuan per tonne to 93,900 yuan per tonne.
• The SHFE May tin contract rose by 1,060 yuan per tonne to 148,410 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.02% at 96.1 as at 10.23 am Shanghai time.
• In equities, the Shanghai Composite was up by 0.27% to 2,588.09 as at 11.02 am Shanghai time.
• In European data on Wednesday, the Confederation of British Industry’s industrial order expectations came in at -1, missing an expected reading of 5 and down from 8 previously. EU consumer confidence for January stood at -8, down from both an expected and previous print of -6.
• In US releases on Wednesday, house prices rose by 0.4% in November last year from the prior month, beating the forecast of a 0.3% month-on-month rise, while the Richmond manufacturing index was in line with expectations at -2 in January.
• In data on Thursday, there is a host of flash manufacturing and services purchasing managers’ index (PMI) releases out for France, Germany, the European Union and the United States.
• Other data of note today includes the European Central Bank’s rate decision and press conference, while the Conference Board’s leading index, natural gas storage and weekly crude oil inventories from the US are also expected.
• The second day of the World Economic Forum’s annual meeting in Davos, Switzerland, also takes place on Thursday.