LIVE FUTURES REPORT 01/04: Progress in US-China trade talks, healthy data boosts SHFE base metals prices; copper up 1.1%

Base metals prices on the Shanghai Futures Exchange were broadly up during morning trading on Monday April 1, with investor appetite for riskier assets improving amid continued progress in US-China trade talks and following the release of better than expected Chinese manufacturing data.

Copper outperformed its peers this morning; the red metal’s most-traded May contract on the SHFE rising to 49,350 yuan ($7,352) per tonne as at 9.58am Shanghai time, up by 1.1% or 550 yuan per tonne from Friday’s close of 48,800 yuan per tonne.

China and the United States held a fresh round of trade talks in the Chinese capital of Beijing last week and achieved “new progress”, according to China’s Ministry of Commerce.

While there has been few details surrounding this “progress”, the general view among market participants is that the two nations are heading toward a deal that will end a year-long trade spat.

Another round of US-China trade talks are scheduled for this week, and will be held in Washington.

Meanwhile, better than expected manufacturing data from China over the weekend has injected further optimism into the market.

China’s official manufacturing purchasing managers’ index (PMI) rose to 50.5 in March, beating the expected 49.6 and improving from 49.2 in February. A reading above 50 indicates industry expansion, while below that level signals contraction.

The reading signaled a stabilization in the world’s second-largest economy, easing fears of weakening demand in China.

“The manufacturing PMI surprised on the high side at 50.5 (exp 49.6) and suggests that China’s industrial production will rebound sharply from the record low in February,” Felicity Emmett, senior economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

China’s official non-manufacturing PMI also beat expectations with a reading of 54.8 in March, above the forecast 54.5 and previous 54.3.

“The data suggest a cyclical downturn in [gross domestic product] growth will likely bottom in the first quarter with year-on-year growth of 6.4%,” Emmett added.

In supply news, Codelco has decided to terminate an engineering and construction contract with Canada-based SNC-Lavalin and to take over a project at its Chuquicamata smelter to ensure compliance with new environmental regulations in the South American country, thus startup at the smelter will be postponed to late April.

Chuquicamata owns an annual capacity of 320,000 tonnes of refined copper, and has been out of the production since mid-December 2018 to upgrade its facilities to align with more stringent emissions-capture regulations in Chile.

Other highlights
– Lead was another strong performer on the SHFE this morning, with the metal’s most-traded May contract climbing by 1.1% or 185 yuan per tonne to 16,915 yuan per tonne as at 9.58am Shanghai time.
– The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, softened to 97.20 as of 11.45am Shanghai time, comparing with 97.24 at Friday’s close.
– In US data last Friday, new home sales in March came in at 667,000, above the 625,000 estimate. Revised University of Michigan consumer sentiment and inflation expectations were 98.4 and 2% respectively.
– US releases scheduled for today include retail sales, final manufacturing PMI, construction spending and the ISM manufacturing PMI.

Anna Xu

anna.xu@fastmarkets.com

Published

Anna Xu

April 01, 2019

05:56 GMT

Shanghai