LIVE FUTURES REPORT 20/09: Most SHFE base metals prices drift upward; tin weakens

Base metals traded on the Shanghai Futures Exchange were largely in positive territory during the morning trading session on Friday September 20, but gains were limited owing to lingering macroeconomic concerns.

There was a raft of central bank policy decisions on Thursday following the US Federal Reserve’s decision a day earlier to cut interest rates for the second time this year. The Swiss National Bank, the Bank of England and the Bank of Japan all left rates unchanged, while Norges Bank raised rates to 1.5% from 1.25%.

“The big dogs of the central bank world appear content to see how the trade talks play out in Washington in October before making their next move,” Jeffrey Halley, senior market analyst at online trading services provider Oanda, said in a morning note.

With little to take away from Thursday’s central bank decisions and no major data to note on Friday, the base metals seem content to drift higher for now with a softening of the dollar likely providing support.

The dollar index, measuring the strength of the US currency against a basket of foreign currencies, was down by 0.09% at 98.25 as at 10.49am Shanghai time. This is down from a reading of 98.55 at a similar time on Thursday.

But wider macroeconomic concerns are putting a cap on any upside in the base metals.

On Thursday, the Organisation for Economic Co-Operation and Development (OECD) cut its global economic growth forecast for 2019 to 2.9% from 3.6% previously, to mark the weakest growth since the 2008-2009 financial crisis.

The OECD cited the trade war between the United States and China as the reason for global growth plunging to its lowest levels in a decade.

Trade negotiators from the US and China resumed face-to-face talks in Washington on Thursday and will continue on Friday. This week’s talks are aimed at paving the way for high-level discussions early next month that will determine whether the two countries are moving toward a deal or new and higher tariffs on each other’s goods.

In the SHFE base metals, nickel was the outperformer this morning with its most-traded November contract rising to 137,090 yuan ($19,314) per tonne as at 10.24am Shanghai time, an increase of 670 yuan per tonne - or 0.5% - from Thursday’s close of 136,420 yuan per tonne.

“Nickel's fundamental dynamic remains tight and, given the latest Asian nickel market developments, the global refined nickel market could get tighter in the very short term,” Fastmarkets analyst Andy Farida said.

“Although selling momentum has stalled, nickel is in no hurry to run to the upside amid the ongoing macro-level uncertainty,” Farida added.

The rest of the complex, barring tin, were ranged between a gain of 0.1% for the November copper and November zinc contracts and an increase of 0.4% for the November aluminium contract.

Tin was the lone SHFE base metal in negative territory, with its most-traded January contract declining by as much as 0.5% by the end of the morning trading session.

Other highlights
  • In US data on Thursday, the Philadelphia Federal Reserve manufacturing index stood at 12 in September, surpassing the expected reading of 10.9. Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 208,000 for the week ended September 14, while existing home sales increased 1.3% to a seasonally adjusted annual rate of 5.49 million units in August.
  • It is a light day for data on Friday with European Union consumer confidence and speeches by US Federal Open Market Committee members John Williams and Eric Rosengren of note.

Sally Zhang

sally.zhang@fastmarkets.com

Published

Sally Zhang

September 20, 2019

05:28 GMT

Shanghai