LIVE FUTURES REPORT 30/10: SHFE base metals prices mostly little changed ahead of Fed announcement

Base metals prices on the Shanghai Futures Exchange were largely up but overall little changed during the morning trading session on Wednesday October 30, with investors adopting a cautious approach ahead of an expected interest rate cut by the US Federal Reserve.

That said, the SHFE base metals continued to find some support from slight optimism stemming from ongoing trade negotiations between China and the United States and a weaker US currency. Gains ranged between 0.06% for January tin and 0.57% for December nickel. December zinc was unchanged from its previous close.

“The US-China trade deal continues to progress with expectations that the ‘Phase One’ deal will be signed on 17 November when the superpowers meet in Chile at the Asia-Pacific Economic Cooperation (APEC) summit,” Felicity Emmett, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

“Despite [US President Donald] Trump saying they are ahead of schedule, negotiators have warned that the deal may not be ready to sign. The additional tariffs scheduled to be applied in December remain in place for now,” Emmett added.

Furthermore, a softer dollar index is also lending broad support to the SHFE base metals this morning.

The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was at 97.70 as at 9.52am Shanghai time, compared with 97.77 at roughly the same time on Tuesday.

The softness of dollar came amid expectations that the Federal Reserve will cut the federal funds rate for a third consecutive time later today.

“Future expectations of the path of US interest rates are one of two critical macroeconomic themes that will drive markets for the remainder of 2019 and into 2020,” Jeffrey Halley, senior market analyst at online trading services provider Oanda, said in a morning note

Tracking the trend seen on the London Metal Exchange late on Tuesday, nickel continued to outperform its peers among the SHFE base metals complex with the metal’s most-traded December nickel contract rising to 133,400 yuan ($18,873) per tonne as at 9.52am Shanghai time, up by 760 yuan per tonne – or 0.57% – from Tuesday’s close of 132,640 yuan per tonne.

The SHFE nickel price’s more subdued performance relative to the LME three-month price follows news that Indonesia’s ban on nickel ore exports will begin in January 2020, as previously scheduled. This reverses reports on October 28 that the ban would begin with immediate effect.

Other highlights

  • Zinc was the laggard of the SHFE complex, with the metal’s most-traded December contract unchanged at 19,110 yuan per tonne as at 9.52am Shanghai time.
  • In US data on Tuesday, the Conference Board’s consumer confidence index for the October period fell to 125.9 from 126.3 previously, while it fell short of its expected level of 128.2, indicating a dip in financial confidence relative to consumer spending.
  • In data on Wednesday, German preliminary consumer price index (CPI) data and a host of US releases including the ADP non-farm employment change, advance gross domestic product, crude oil inventories and the US Federal Open Market Committee’s (FOMC) press conference, statement and rate decision.