LIVE FUTURES REPORT 28/08: SHFE base metals prices broadly down; aluminium, tin most resilient

The general weakness came despite renewed risk sentiment across global markets following the announcement of the United States-Mexico Trade Agreement on Monday.

The new trade deal is expected to last 16 years and will be reviewed every six years pending its approval by Congress, according to US Trade Representative Robert Lighthizer.

“Risk sentiment was given a further leg up overnight with the news that the US and Mexico had agreed on a trade deal to replace [the North American Free Trade Agreement],” David de Garis, director and senior economist with the National Australia Bank, said in a morning note.

Yet the renewed positivity over the US-Mexico deal was not as broadly felt in China after US President Donald Trump said it is not the right time for trade negotiations with the Asian nation.

“They want to talk,” Trump said. But “it’s just not the right time to talk right now, to be honest.”

The comments fueled concern in the market that a swift end to tensions between the US and China would not be forthcoming and that the prolonged spat will temper growth in the world’s second-largest economy.

“Far from ushering in a more reasonable attitude to free trade generally, it is safer to view this latest deal as one that the US has managed to bash into shape by sheer negotiating muscle,” economists Robert Carnell and Prakash Sakpal of ING Asia Pacific said in a note.

“So as far as China and Asia are concerned, this new Mexico deal solves nothing. Indeed, it strengthens the US position to play hard-ball with China. This doesn’t look good for the region,” they added.

In addition, with the London Metal Exchange closed on Monday due to a public holiday in the United Kingdom and a lack of significant data released overnight, investors in China seem to be waiting for the start of the European day to establish real market direction – with prices broadly drifting lower in the meantime.

Copper prices on the SHFE fell the most this morning, giving back its gains from Monday. The most-traded October contract slid to 48,490 yuan ($7,112) per tonne as at 10.36am Shanghai time, down by 0.6% or 300 yuan per tonne from Monday’s close.

Lead was close behind the red metal, down by 0.5% in the morning session, while zinc and nickel logged only marginal losses. Aluminium and tin, however, bucked the general weakness to record slight gains.

Base metals prices

• The SHFE October lead contract price slid 85 yuan per tonne to 18,335 yuan per tonne.
• The SHFE October zinc contract price dipped 25 yuan per tonne to 21,280 yuan per tonne.
• The SHFE November nickel contract price edged down 90 yuan per tonne to 108,670 yuan per tonne.
• The SHFE October aluminium contract price was up slightly by 5 yuan per tonne to 14,740 yuan per tonne.
• The SHFE January tin contract price ticked up by 40 yuan per tonne to 146,020 yuan per tonne.

Currency moves and data releases

• The dollar index was up 0.09% to 94.85 as at 11.58am Shanghai time.
• In other commodities, the Brent crude oil spot price was up 0.88% to $76.27 per barrel as at 10.35am Shanghai time.
• In equities, the Shanghai Composite was unchanged at 2,780.98 as at 11.30am Shanghai time.
• In European data on Monday, Germany’s Ifo business climate reading came in above expectations at 103.8 – 101.9 had been called for.
• Today we have the European Union’s M3 money supply and private loans data as well as a host of US releases including goods trade balance, preliminary wholesale inventories, the Standard & Poor’s/Case-Shiller house price index, Conference Board consumer confidence and the Richmond manufacturing index.