LIVE FUTURES REPORT 27/07: SHFE base metals prices drift upward on easing trade tensions; market awaits further direction

Easing trade tensions after the United States and the European Union agreed to negotiate tariffs on industrial goods were broadly supportive to the SHFE base metals complex on Friday morning.

“Although short on results or details, this is the type of development that is far more reassuring to market sentiment and is preferred to the alternative scenario of lobbing punitive and potentially harmful tariffs on one another,” INTL FCStone analyst Edward Meir said.

Gains were limited, however, with a firmer dollar ahead of the release of gross domestic product (GDP) data from the US later on Friday checking any upside for the base metals.

Second-quarter GDP data from the US will be released late on Friday, and economists and analysts expect it to be one of the best quarters in recent years. Economists have forecast that the US economy grew by an annualized rate of 4.2% in April-June 2018, more than double the rate seen in the previous three months.

The positivity surrounding the release has provided support to the dollar, which firmed overnight, resulting in downward pressure on base metals prices this morning. The dollar index stood at 94.72 as at 10.08am Shanghai time on Friday, compared with a reading of 94.45 at roughly the same time on Thursday.

With such a major release expected later on Friday, investors were also adopting a “wait-and-see” approach to trading this morning, with the more cautious tone in the market keeping prices from running higher.

Nickel was the outperformer of the SHFE complex during the early session on Friday, with the metal’s strong fundamental backdrop continuing to support its prices. Its most-traded September contract soared to 112,830 yuan ($16,633) per tonne as at 10.57am Shanghai time, up by 1,510 yuan per tonne or 1.4% from Thursday’s close.

“The latest figures from the International Nickel Study Group (INSG) continue to reflect bullish underlying fundamentals; the refined market stood in a 52,600-tonne deficit in January-April 2018, higher than the 37,800-tonne deficit a year earlier. The structural deficit since 2016 at 49,200 tonnes and 2017 at 113,700 tonnes continues to bode well for sustained support,” Metal Bulletin analyst Andy Farida said.

“Underlying demand remains strong too. World stainless steel melting production in the first three months of 2018 rose by 9.5% year on year to 12.77 million tonnes, according to data from the International Stainless Steel Forum,” Farida added.

Base metals edge up; zinc flat

• The SHFE September lead contract ticked up by 30 yuan per tonne to 18,850 yuan per tonne.
• The SHFE September copper contract moved up 50 yuan per tonne to 50,190 yuan per tonne.
• The SHFE September aluminium contract edged up 40 yuan per tonne to 14,370 yuan per tonne.
• The SHFE September zinc contract was unchanged at 21,380 yuan per tonne.
• The SHFE September tin contract rose 740 yuan per tonne to 146,260 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.06% at 94.72 as at 10:08 am Shanghai time.
• In other commodities, Brent crude oil was up by 0.36% at $74.49 per barrel as at 11:08 am Shanghai time.
• In equities, the Shanghai Composite soared 0.2% to 2888.18 as of 10.25 am Shanghai time.
• In US data on Thursday, durable goods orders rose by 1% in June, missing an expected increase of 3%.
• Weekly unemployment claims were slighter higher than forecast at 217,000, while the trade deficit in goods widened to $68.3 billion in June, up $3.6 billion from May.
• In Chinese data on Friday, profits at industrial companies rose 20% in June from a year earlier, down from a 21.1% gain in May, according to the country’s National Bureau of Statistics. In the first half of 2018, industrial profits grew at 17.2% from a year ago, quickening from a 16.5% year-on-year increase in January-May.
• Later today, there is the US’ second quarter GDP reading, GDP price index and the University of Michigan’s consumer sentiment and inflation expectations.