LIVE FUTURES REPORT 26/06: SHFE base metals prices mixed as firmer dollar offsets trade optimism; Zn up 0.6%

Base metals prices on the Shanghai Futures Exchange were split into two camps during Asian morning trading on Wednesday June 26, with copper, nickel and zinc securing gains while the rest weakened marginally.

The mixed moves come as a slight recovery in the dollar offsets the optimism stemming from recent trade developments ahead of upcoming talks between US President Donald Trump and China’s Xi Jinping at the end of the week.

The most-traded August zinc contract on the SHFE stood at 20,045 yuan ($2,913) per tonne as at 10.52am Shanghai time on Wednesday, up by 110 yuan per tonne, or 0.6%, from Tuesday’s close of 19,935 yuan per tonne.

The August copper and nickel contracts saw more moderate gains of 0.4% and 0.2% respectively, while the August aluminium and lead contracts dipped by 0.1% and 0.3% respectively and the September tin contract slid by 0.3%.

Market sentiment had turned more bullish following news on Tuesday that Chinese vice premier Liu He had agreed with US trade representative Robert Lighthizer and US treasury secretary Steven Mnuchin to resume talks over the escalating US-China trade dispute. This resulted in general strength across riskier assets, including the base metals.

But this strength has waned slightly amid an uptick in the dollar following comments from US Federal Reserve chairman Jerome Powell overnight in which he emphasized that monetary policy is under review though he did not overtly state that an interest rate cut in July is at hand.

“The much-awaited Powell speech has the left the market none the wiser in terms of whether or not the Fed will look to embark on a new easing cycle at the end of July. In line with his post [Federal Open Market Committee] remarks, the Fed chair said that ‘many FOMC participants judge that the case for somewhat more accommodative policy has strengthened’. But he added that ‘…we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment’,” Rodrigo Catril, currency strategist at National Australia Bank, said.

The dollar index edged higher following Powell’s comments, reclaiming the psychological level of 96 and was up by 0.1% at 96.29 as at 10.52am Shanghai time. This compares with a reading of 95.93 at a similar time on Tuesday.

Other highlights

  • The Shanghai Composite Index moved down by 0.3% to 2,973.26 as at 11.08am Shanghai time.
  • In US data on Tuesday, the Conference Board’s reading of consumer confidence fell to 121.5 in June, from 131.3 previously and missing the expected 132. New home sales also disappointed with 626,000 units in May, missing the forecast for 686,000 units.
  • In data on Wednesday, inflation report hearings from the United Kingdom and the US’ durable goods orders, goods trade balance and crude oil inventories are of note.
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