LIVE FUTURES REPORT 26/10: Stronger dollar continues to pressure SHFE base metals prices; copper, lead buoyed

The dollar index, at 96.61 as at 9.52am Shanghai time, continues to strengthen on the expectation of a further increase in US interest rates in December. The index had hit a high of 96.74 on Thursday, its highest since August 15 when it reached a 2018 high of 96.99.

Comments from the US Federal Reserve’s new vice chair Richard Clarida overnight suggested he supported a rise in US interest rates in December.

“The Fed’s new vice chair Clarida, who the markets were extremely focused on, stuck to the data-dependent optimistic view his boss chair Jay Powell rolled out last [at the Federal Open Market Committee meeting,] cementing the December rate hike narrative,” Oanda’s head of trading Asia Pacific, Stephen Innes, said.

The firmer US currency is stifling buying interest among investors, which has led to further selling across most of the base metals traded on the SHFE.

Nickel suffered most lost during Asian morning trading hours following it plummet to 100,160 yuan ($14,423) per tonne yesterday, the lowest point since September 12.

Nickel fell the most with metal’s most-traded January contract on the SHFE sliding to 100,880 yuan ($14,520) per tonne as at 9.51am Shanghai time, down by 1,160 yuan per tonne from Thursday’s close.

“One of the current headwinds for nickel is a rapid ramp-up of ferro-nickel production, which is narrowing the supply deficit seen previously for nickel. However, with nickel prices nearing 100,000 yuan per tonne after several severe falls, there is limited room for prices to fall further,” China’s Guotai Junan Futures said on Friday.

Copper on the other hand managed to secure some small gains this morning, no doubt finding support from tightening supply fundamentals.

The most-traded December copper contract on the SHFE rose to 50,050 yuan per tonne at 9.51am Shanghai time, up 290 yuan per tonne from Thursday’s close.

“Continuing falls in [copper] inventories should see prices well supported in the short term,” ANZ Research said.

Copper stocks on the London Metal Exchange fell by a net 2,650 tonnes to 149,575 tonnes on Thursday, with 10,100 tonnes freshly canceled across LME-listed warehouses in Asia and North America.

“The International Copper Study Group estimates that the refined copper market was in a deficit of 47,500 tonnes in July 2018 – a fourth straight monthly deficit. This deepened the cumulative deficit for January-July 2018 to 155,000 tonnes, which compares with a deficit of 188,000 tonnes in January-July 2017,” Fastmarkets analyst Boris Mikanikrezai said.

Base metals prices

• The SHFE December copper contract price ticked up by 290 yuan per tonne to 50,050 yuan per tonne.
• The SHFE December aluminium contract price dipped by 60 yuan per tonne to 14,195 yuan per tonne.
• The SHFE December zinc contract price fell by 130 yuan per tonne to 22,035 yuan per tonne.
• The SHFE December lead contract price gained 40 yuan per tonne to 18,460 yuan per tonne.
• The SHFE January tin contract price declined by 220 yuan per tonne to 147,550 yuan per tonne.
• The SHFE January nickel contract price dropped by 1,160 yuan per tonne to 100,880 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.01% at 96.61 as of 9.52am Shanghai time.
• In other commodities, the Brent crude oil spot price was down $0.19 to $76.43 per barrel as of 9.52am Shanghai time.
• In equities, the Shanghai Composite was down 0.23% to 2,598.44 as at 11.01am Shanghai time.
• In US data on Thursday, core durable goods orders ticked up by 0.1% month on month in September, while durable goods orders increased by 0.8%. The goods trade widened to $76 billion, while weekly unemployment claims came in at 215,000. Pending home sales increased by 0.5% in September.
• The economic agenda is mainly focused on the US today with the advance read of third-quarter gross domestic product (GDP), the advance GDP price index and the University of Michigan’s consumer sentiment and inflation expectations due.
• In addition, European Central Bank president Mario Draghi is speaking.