“There were moments of optimism around restarts of business activities in China and expectations of v-shaped recovery following China’s stimulus announcements,” John Bromhead, foreign exchange strategist from ANZ Research, said in morning note.
On Monday, China’s central bank lowered a key interest rate and injected more money into markets, which in turn led to an increase in risk appetite among investors.
But wider concerns about the coronavirus outbreak might have on the global economy as well as a firmer dollar are acting as headwinds for the base metals complex.
As a result, the SHFE base metals gave a mixed performance this morning.
Nickel, as it was at the end of morning trading on Tuesday
, was the worst performer of its complex; the most-traded May nickel contract slid to 104,480 yuan ($14,952) per tonne, down by 0.7% or 710 yuan per tonne from Tuesday’s close of 105,190 yuan per tonne.
“Several key stainless steel mills in China are mulling over production cuts on logistics issues and high stainless steel stocks level, for instance, Zhangjiagang Pohang Stainless Steel confirmed yesterday that it would temporarily stop production for six days from February 20, removing about 20,000 tonnes stainless steel from market,” a nickel trader said this morning.
“The first quarter is typically a slack season for stainless steel - nickel’s main consumer - and by combining the logistics trouble resulted from outbreak of Covid-2019, demand for nickel just gets weaker. The ongoing lockdown in many places makes it impossible for many workers to arrive at their mills on time, and for products to deliver to customers on time,” a Shanghai-based analyst said.
Elsewhere, aluminium and zinc also experienced weakness this morning, with the April aluminium contract down by 0.3% to 13,680 yuan per tonne and the April zinc contract down by 0.3% to 17,145 yuan per tonne. Gains were seen in the rest of the complex; April copper rose by 0.2% to 46,370 yuan per tonne, April lead rose by 0.3% to 14,495 yuan per tonne and June tin ticked up by 0.1% to 135,650 yuan per tonne.
- The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was down by 0.02% at 11.30pm Shanghai time, at 99.42. This compares with a reading of 98.75 at roughly the same time a week ago.
- The Shanghai Composite Index was up by 0.29% at 2,993.70 as at 11.30am Shanghai time.
- In data on Tuesday, economic sentiment readings from Germany and the European Union disappointed at 8.7 (versus 20.0 expected) and 10.4 (versus 21.3 expected) respectively. The United States’ Empire State Manufacturing Index was better than forecast at 12.9 - exceeding the expected reading of 5.1.
- Wednesday is a busy day for data with the United Kingdom’s consumer price index, house price index and producer price index (PPI) of note. US releases including building permits, housing starts and PPI are also of note.