LIVE FUTURES REPORT 31/10: LME base metals capped by weak China PMI data despite Fed cut

The three-month prices of base metals traded on the London Metal Exchange were trading down in the morning session on Thursday October 30 on lackluster China PMI, shrugging off the interest rate cut announced by the United States' Federal Reserve the day before.

The three-month prices of base metals traded on the London Metal Exchange were trading down in the morning session on Thursday October 30 on lacklustre China PMI and shrugging off the interest rate cut announced by the United States Federal Reserve the day before.

While the US Fed cut interest rates for the third time in 2019 so far yesterday, this was eclipsed by the release of weak Chinese PMI data, which fell to 49.3 in October to 49.8 previously.

Ongoing trade tensions and tariff uncertainty emanating from the two countries continue to keep metals appetites bearish despite dovish concessions from global central banks.

The US central bank cut borrowing rates by between 1.5% and 1.75% on October 30 in a bid to stimulate sluggish economic growth in the country - US GDP rose just 1.9% in the third quarter of the year.

While this figure was better than expected, it pales in comparison with China’s 6% growth over the same period.

Although LME base metals have broadly followed the macro of late they failed to react to the rate cut.

The LME three-month nickel price, typically considered a macro proxy, made the most significant move down in the morning session, trading at around $16,780 per tonne from the $16,660 per tonne at the previous day’s close.

LME nickel’s three-month price failed to react to ongoing drawdowns, with 1,218 tonnes of material flowing out of LME-approved sheds as of 9am this morning versus a 300-tonne inflow at the same time yesterday. LME nickel stocks are now 66,990 tonnes.

Copper was subject to further drawdowns following approximately 22,000 tonnes removed from LME global warehouses yesterday , with 6,925 tonnes of material flowing out as of 9am today.

But the copper price failed to react once more to the significant drawdowns, trading down marginally at around $5,883 per tonne from the previous day’s $5,908 per tonne close.

The LME three-month copper price is abating having reacted to supply tailwinds in the form of ongoing threats of strike action in Chile, the world’s largest copper producer, which manifested on Friday October 25.

‘Earlier this week LME copper touched a six-week high at $5,941.50 per tonne. It had risen for three straight weeks on Friday as workers at mines and ports in top producer Chile joined a nation-wide strike,’ Marex Spectron’s Chester Alden said in a morning note.

Other highlights
  • The US dollar index is trading down 0.16% at 97.28 but has failed the stimulate buying interest across the LME base metals complex, where purchase volumes are low this morning

Amy Hinton

amy.hinton@fastmarkets.com

Published

Amy Hinton

October 31, 2019

10:33 GMT

London