LIVE FUTURES REPORT 29/07: SHFE base metals prices dip on firm dollar, trade uncertainty; zinc rises 0.8%

With the exception of zinc, base metals prices on the Shanghai Futures Exchange were down during the morning trading session on Monday July 29, dragged down by a firm dollar and trade uncertainty.

US-China trade talks restart later today - the first face-to-face discussions since the countries’ presidents met in Japan at the end of June - but expectations for a deal are low after White House economic advisor Larry Kudlow said, “I wouldn’t expect any grand deal”.

US president Donald Trump further dampened expectations after he said on Friday that China could delay a deal until after the 2020 presidential election in the hope that they could then negotiate more favorable terms with a different US president.

“I think probably China will say ‘Let’s wait,’” Trump told reporters at the White House. “Let’s wait and see if one of these people who gives the United States away, let’s see if one of them could get elected.”

Further pressuring the SHFE base metals this morning was a firm US currency.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 97.95 as at 10.39am Shanghai time, compared with a low on July 19 of 96.75. The firmer dollar follows expectations for more quantitative easing from the European Central Bank (ECB) to combat against a slowdown in the global economy.

“The dovish outcome of the European Central Bank meeting, in which ECB president Mario Draghi hinted for additional easing measures at the next meeting in September, pushed the euro lower and the dollar higher. A stronger dollar is likely until at least the forthcoming Federal Reserve monetary policy decision on July 31,” Boris Mikanikrezai, Fastmarkets analyst, noted.

As a result of the negative backdrop and increased caution in the market, most SHFE base metals prices were down on Monday morning. Tin, giving the worst performance of its peers, had its most-traded September contract drop to 134,140 yuan ($19,497) per tonne as at 10.39am Shanghai time, down by 1,160 yuan per tonne, or 0.9%, from Friday’s close of 135,300 yuan per tonne.

Zinc bucked the trend, however, with the metal’s most-traded September contract rising by 150 yuan per tonne, or 0.8%, to 19,400 yuan per tonne as at 10.39am Shanghai time.

Other highlights

  • The Shanghai Composite Index dipped by 0.14% to 2,940.5 as at 11.35am Shanghai time.
  • In EU data last Friday, German import prices for the June-July period were 1.4% lower month on month, falling from a dip of just 0.1% the prior month.
  • In data from the US on last Friday, advance gross domestic product (GDP) figures - on a quarter on quarter basis - for the June-July period beat expectations, coming in at 2.1%, but down from the prior reading of 3.1% and missing President Trump’s target of 3% economic growth.
  • There is no major data due for release on Monday.
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