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The more cautious tone follows the release of weaker-than-expected data from China earlier this morning and tempered expectations of an imminent US-China trade deal.
Speaking before Congress on Wednesday, US Trade Representative Robert Lighthizer delivered a more cautious message in terms of progress in US-China trade negotiations.
“In contrast to comments from [US President Donald Trump], a few days ago where the President suggested an agreement could be signed late in March, Lighthizer sounded less optimistic noting that that the issues on the table between the US and China ‘are too serious to be resolved with promises of additional purchases,’ and that it is still too early to tell if China will concede to US demands,” Rodrigo Catril, currency strategist at National Australia Bank, said in a morning note.
Fueling further risk-off sentiment in the market was the release of disappointing Chinese purchasing managers’ index (PMI) data earlier this morning.
China’s official manufacturing PMI fell for a third consecutive month, dropping to 49.2 in February from 49.5 in January, according to data released by the country’s National Bureau of Statistics. A reading below 50 signals industry contraction, while above that level indicates expansion.
The non-manufacturing PMI also came in below expectations at 54.3 in February, below a forecast of 54.5 and the previous reading of 54.7.
Yet the base metals have held up relatively well in spite of the weak Chinese data, with the complex managing to secure price gains – albeit marginal ones in the cases of aluminium and zinc.
The dollar index, at 96.11 as at 9.52am Shanghai time, remains in relatively low ground compared with a high of 97.37 on February 15 and this is providing some support to the base metals.
In lead, prices were further buoyed by news of supply disruptions in China after Inner Mongolian miner Yinman Mining was suspended this past weekend following an accident at the company’s mine.
The most-traded April lead contract on the SHFE stood at 17,335 yuan ($2,588) per tonne as at 9.52am Shanghai time, up by 190 yuan per tonne from its close on Wednesday.
“Yinman’s disaster will further cement the lead supply deficit. Meanwhile, downstream smelters’ stocks are gradually running out, and a large proportion of smelters have need to restock,” Chinese brokerage Citic Futures said in a morning note.
Base metals prices
Currency moves and data releases