LIVE FUTURES REPORT 30/03: SHFE base metals prices retreat on surge in coronavirus cases

Base metals prices on the Shanghai Futures Exchange were down across the board at the close of morning trading on Monday March 30, with aluminium leading the complex lower with a fall of 2.1%.

The weakness across the complex was primarily due to a loss of confidence among investors while the number of infections and deaths related to the Covid-19 pandemic continue to climb.

This after sentiment had somewhat been buoyed last week by the announcement of several large stimulus packages by governments around the world to combat the economic fallout from the viral outbreak.

The United States and Europe in particular have seen a sharp increase in the number of coronavirus cases and deaths; the total number of confirmed cases in the US and Italy have both now surpassed that in China, where the virus was first reported.

According to the World Health Organization, the US has around 142,637 confirmed cases of the virus and 2,485 deaths at the time of writing, while Italy has around 97,689 confirmed cases and 10,779 deaths. This compares with China’s 81,470 confirmed cases and 3,304 deaths.

“The big question for markets is whether the huge stimulus introduced so far across the globe will be enough to help the global economy withstand the economic shock from the COVID-19 containment measures,” Rodrigo Catril, currency strategist at the National Australia Bank, said in a morning note.

“To answer this question one needs to know the magnitude of the containment measures and for how long they will be implemented. This is the big know unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved,” Catril added.

On Friday, China and the US both announced new stimulus measures to shore up their respective economies.

US President Donald Trump signed a massive $2 trillion emergency spending bill into law, promising to deliver a wave of to individual Americans, businesses and healthcare facilities. The bill includes $500 billion in loans and help for big businesses such as airlines and $350 billion to small businesses as well as direct cash payments to low- and middle-income households.

In China, authorities will increase its fiscal deficit as a share of gross domestic product, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilize the economy, Chinese state-run news agency Xinhua reported on Friday.

But the news did little to quell investors’ rising concerns that the latest measures are not enough to prevent a deeper global economic downturn amid coronavirus-related lockdowns in countries around the world, with this uncertainty evident in the weaker tone seen across broader markets this morning.

In the base metals on the SHFE, aluminium was the worst performer of its complex in terms of percentage losses; the most-traded June aluminium contract fell to 11,510 yuan ($1,622) per tonne at the end of the early session on Monday, down by 245 yuan per tonne or 2.1% from Friday’s close of 11,755 yuan per tonne.

The rest of the SHFE complex also weakened: May copper at 38,590 yuan per tonne (-1.5%), May zinc at 15,095 yuan per tonne (-1.9%), May lead at 13,755 yuan per tonne (-0.7%), June tin at 116,430 yuan per tonne (-0.8%) and June nickel at 92,870 yuan per tonne (-0.6%).

Other highlights

  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 98.69 as at 11.30am Shanghai time, down from a reading of 99.03 at a similar time on Friday.
  • The Shanghai Composite Index was down by 1.59% at 2,728.07 as at 11.30 am Shanghai time.
  • The economic agenda is light today with Germany’s preliminary core producer index and Spain’s flash consumer price Index, the United Kingdom’s mortgage approvals and net lending to individuals as well as US pending home sales due.