LIVE FUTURES REPORT 24/05: Softer dollar provides some relief for SHFE base metals; Cu up 0.7%

Base metals prices on the Shanghai Futures Exchange were broadly up during morning trading on Friday May 24, with a softening in the dollar overnight providing much-needed relief to the complex.

Copper, aluminium, lead and nickel were up between 0.3% and 0.8% on the SHFE this morning, while zinc and tin declined by 0.4% and 0.3% respectively.

The red metal’s most-traded July contract on the SHFE rose to 46,990 yuan per tonne as at 9.50am Shanghai time, up by 310 yuan per tonne, or 0.7%, from Thursday’s close of 46,680 yuan per tonne.

A softening in the US currency overnight seems to be the main driver behind the strength in most of the SHFE base metals this morning. The dollar index, at 97.88 as at 9.50am Shanghai time, is down from a high of 98.38 on Thursday.

The weakness in the dollar follows disappointing US data overnight that saw the flash manufacturing purchasing managers’ index (PMI) slide to 50.6 in May, from 52.6 previously, and new home sales fall to 673,000 units in April from the prior month’s upwardly revised 723,000 units.

“Weak housing and manufacturing data point to a slowing economy. New home sales data fell 6.9% in April reversing the recent strong upward trend. Manufacturing activity fell to its lowest reading since September 2009, with new order data below 50 for the first time in over a decade,” Adelaide Timbrell, an economist with ANZ Research, said in a morning note.

European manufacturing data released on Thursday was similarly disappointing – see other highlights below.

Yet despite the broadly positive performance by the SHFE base metals this morning, the complex continues to contend with headwinds from a prolonged trade war between China and the United States and the negative effect that the spat may have on global economic growth.

“China’s Commerce Ministry said that the US should correct its actions if it wants to continue negotiating. It seems neither the US nor China is ready to compromise and that ongoing tension is becoming a new normal,” Timbrell added.

Other highlights

  • Tin shrugged off the firmer showing exhibited by its peers this morning, with the metal’s most-traded July contract falling to 143,970 yuan per tonne as at 9.50am Shanghai time, down by 450 yuan per tonne from the previous day’s close.
  • “There’s muted demand for tin in China, [offsetting] declining tin ore imports from Myanmar, which serves as support for tin prices,” an analyst with Citic Futures said in a morning note.
  • In European data on Thursday, the German and EU flash manufacturing PMIs for May both disappointed at 44.3 and 47.7.
  • In data on Friday, durable goods orders and a treasury currency report from the US are of note.