LIVE FUTURES REPORT 26/02: SHFE base metals prices continue to react poorly to coronavirus news

Base metals prices on the Shanghai Futures Exchange were all down at the close of the morning session on Wednesday February 26, with persistent concerns over the economic impact of the novel coronavirus (2019-nCoV) outbreak weighing on the market.

The spread of the virus, which causes the disease Covid-19, remains a key theme in broad markets, in particular a sharp increase in the number of infected people outside of China at the start of this week that sparked renewed anxiety among investors.

“Risk off was prevalent again throughout the overnight session as Covid-19 anxiety remained intense. Croatia, Switzerland, Spain and Austria reported their first cases of the virus, while holiday makers in the Canary Islands (Tenerife) were quarantined after an Italian doctor tested positive,” Felicity Emmett, senior economist at ANZ, said in a morning note.

This risk-off sentiment has continued into morning trading on Wednesday, with the SHFE base metals all recording losses at the close of the morning trading session. Nickel led the decline, the metal’s most-traded June contract dropping to 101,820 yuan ($14,471) per tonne, a drop of 1,020 yuan per tonne or 1% from Tuesday’s close of 102,970 yuan per tonne.

Elsewhere, the April copper contract dropped by 0.5% to 45,720 yuan per tonne, April aluminium dipped by 0.1% to 13,520 yuan per tonne, April zinc slid by 0.6% to 16,460 yuan per tonne, April lead fell by 0.3% to 14,515 yuan per tonne and June tin weakened by 0.2% to 136,420 yuan per tonne.

In regard to copper, the coronavirus continues to dominate market focus, resulting in higher volatility in the metal’s price, according to Fastmarkets analyst Boris Mikanikrezai.

“The announcement of more proactive and flexible monetary policy measures from China has failed to shore up sentiment – apparent in a broad-based risk sell-off. It seems that investors expect even more action from central banks,” Mikanikrezai said.

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.11% at 99.11 as at 11.30am Shanghai time. This compares with a peak of 99.91 on February 20.
  • The Shanghai Composite Index was up by 0.29% at 3.021.86 as at 11.30 am Shanghai time.
  • In data on Tuesday, Germany’s gross domestic product (GDP) failed to rise in the fourth quarter of 2019 from the prior quarter, which was within analysts’ forecasts.
  • The Conference Board’s reading of consumer sentiment in the United States disappointed at 130.7 in February, a reading of 132.6 had been expected. But the actual reading was higher than the downwardly revised 130.4 recorded in January.
  • Data of note on Wednesday includes US new home sales and crude oil inventories.