LIVE FUTURES REPORT 27/09: SHFE base metals prices broadly down amid pre-holiday book squaring

Nickel led the complex lower with a 1% drop, followed by lead, aluminium and copper. Zinc was little changed with a slight upside bias, while tin outperformed its peers with a 0.7% gain.

The weaker tone in the SHFE base metals comes despite positive trade developments overnight; China announced that it will cut import tariffs on 1,585 products, including machinery, paper, textiles and construction materials from November 1, according to media reports.

The cuts are expected to lower the tax burden on consumers and companies by 60 billion yuan ($8.7 billion), Chinese state radio reported.

Still, the Chinese government has yet to say how the general tariff cut will affect those US goods affected by retaliatory tariffs in the United States-China trade war, with the uncertainty surrounding the lingering trade dispute continuing to hurt market sentiment.

In addition, the SHFE base metals have fallen amid book squaring activity in the market ahead of China’s week-long National Day holiday, or Golden Week, which begins October 1.

“The Chinese government’s announcement [of a general import tariff cut] is positive but base metals prices mostly fell on the SHFE this morning because traders are closing their long positions before the fourth quarter,” a China-based analyst said.

“Nickel had shown strong gains and traders are probably winding down their positions – possibly due to the persisting market volatility as a whole,” the analyst added.

SHFE tin prices largely shrugged off the broad-based weakness experienced by its peers, and was the only metal to record a significant gain this morning; the most-traded January tin contract climbed 0.7% or 950 yuan per tonne to 146,740 yuan per tonne.

“What is notable is that tin has exhibited the weakest macro-sensitivity among its peers this year,” Metal Bulletin analyst Boris Mikanikrezai said.

“As a result, tin should remain unmoved by negative macro forces,” he added.

Base metals prices

• The SHFE November nickel contract decreased by 1,090 yuan per tonne to 104,620 yuan per tonne.
• The SHFE November copper contract slid 180 yuan to 50,350 yuan per tonne.
• The SHFE November aluminium contract dipped 60 yuan per tonne to 14,480 yuan per tonne.
• The SHFE November zinc contract edged up 10 yuan per tonne to 21,570 yuan per tonne.
• The SHFE November lead contract dropped 175 yuan per tonne to 17,840 yuan per tonne.

Currency moves and data releases

• The dollar index was edged up by 0.05% to 94.32 as at 10.32 am Shanghai time.
• In other commodities, the Brent crude oil spot price rose by 0.66% to $82.02 per barrel as at 10.32 am Shanghai.
• In equities, the Shanghai Composite dipped 0.16% to 2,802.32 as at 10.32 am Shanghai time.
• In US data on Wednesday, the policymaking US Federal Open Market Committee increased the fed funds rate by 25 basis points, as was widely expected, taking the rate to a range of 2-2.25%. The committee also pointed to a further rate rise before the end of the year.
• Meanwhile, US crude oil inventories rose by 1.9 million barrels, against an expected 700,000-barrel decline.
• The economic agenda is busy on Thursday with Germany’s preliminary consumer price index (CPI), the Eurozone’s M3 money supply and a European Central Bank (ECB) bulletin.
• In US data on Thursday, we have core durable goods orders, final gross domestic product, goods trade balance, preliminary wholesale inventories, unemployment claims and pending home sales.
• In addition, ECB president Mario Draghi and US Federal Reserve chair Jerome Powell are speaking.