LIVE FUTURES REPORT 25/07: Most SHFE base metals prices defy dollar strength amid US-China trade optimism; tin jumps 1.5%

Tin led the charge higher with the metal’s most-traded September contract rising to 135,770 yuan ($19,741) per tonne as at 10.37am Shanghai time, up by 2,040 yuan per tonne, or 1.5%, from Wednesday’s close of 133,730 yuan per tonne.

This was followed by gains in October nickel (+0.6%), September lead (0.6%) and September aluminium (+0.5%). On the downside, September copper fell by 0.1% to 47,040 yuan per tonne while September zinc was off by 0.4%.

The broadly positive performance by the SHFE base metals this morning comes despite the US currency holding in high ground. The dollar index was at 97.71 as at 10.37am Shanghai time, down the high on Wednesday of 97.82.

A strong US currency typically dampens investors’ appetite for commodity investment.

Market analysts attributed the recovery in base metals prices to the upcoming US-China trade talks next week which could bring about some resolution, although there were also warnings of over-optimism.

“The resumption of US-China trade talks finally lifted the gloom around the economic outlook in the base metal markets,” David Plank, analyst at ANZ Research, said in a morning note.

“US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China next Monday for high-level talks. This helped temper some concern about the gloomy economic outlook,” he added.

Others were more cautious ahead of the meeting, however, after previous gatherings failed to deliver any concrete results.

“Investors have been here before and this time more details will be needed before a big reaction is felt,” Alfonso Esparza, senior market analyst from online trading services provider Oanda, said on Thursday.

Disappointing manufacturing data from Europe and the United States on Wednesday – see other highlights below – is exerting downward pressure on base metals prices, but for now renewed optimism on trade issues seems to be enough to allow most of the metals to trade in positive territory.

Other highlights

• The Shanghai Composite Index rose by 0.29% to 2,931.9 as at 11.30am Shanghai time.
• In data on Wednesday, the European Union’s flash manufacturing purchasing managers’ index (PMI) fell to 46.4 in July from 47.6, while readings in France and Germany for the same month stood at 50.0 (versus 51.9 previously) and 43.1 (versus 45.0 previously) respectively.
• The US’ flash manufacturing PMI fell to 50.0 in July from an upwardly revised 50.6 previously.
• Data of note on Thursday includes the European Central Bank’s main refinancing rate decision, policy statement and press conference. US releases that include durable goods orders, goods trade balance, preliminary wholesale inventories and unemployment claims are also noteworthy.