LIVE FUTURES REPORT 01/10: LME base metals prices soften on weaker-than-expected US, China economic data

Weaker-than-expected US economic data releases on Monday have dented sentiment in the base metals markets, offsetting the renewed optimism stemming from the finalization of a trilateral trade deal between the US, Mexico and Canada earlier in the day.

The US reported on Monday that while its final manufacturing purchasing managers’ index (PMI) for September was unchanged month on month at 55.6, in line with expectations, the ISM manufacturing PMI came in at 59.8, down from the August reading of 61.3 and below the forecast of 60.1.

US construction spending for August was also weak with a 0.1% increase, down from an upwardly revised 0.2% rise in July and missing the forecast of 0.5% gain.

The softer US data followed Chinese releases over the weekend that showed the country’s Caixin manufacturing PMI fell more than expected in September, dipping to 50 from 50.6 in August. The official manufacturing PMI fell to a seven-month low of 50.8 in September from 51.3 in the prior month and below the forecast 51.2.

The contracting manufacturing sector stirred concerns as markets head into the final quarter of the year, “offsetting the easing of trade concerns following the replacement of the NAFTA agreement signed [on Monday October 1],” according to ANZ Research.

The three-month zinc price lead the declines again on Tuesday, falling 0.49% to $2,643 per tonne from Monday’s close of $2,656 per tonne. Aluminium followed close behind with a 0.46% decrease to $2,074.50 per tonne.

“Judging by its price action for the past two months, LME aluminium has been base-building above the psychological support level of $2,000 per tonne,” Fastmarkets MB analyst Andy Farida said, adding that uncertainty from US sanctions on Russian producer UC Rusal and the US-China trade war have put off market participants from taking a more aggressive stance.

Farida noted though that aluminium’s fundamental backdrop remains fairly positive, with global demand seen outstripping supply; the World Bureau of Metal Statistics reported that the refined aluminum market showed a deficit of 302,000 tonnes in the first seven months of 2018.

The other LME base metals meanwhile tracked the weaker showing of zinc and aluminium, with the three-month nickel and lead prices both falling 0.2% and the copper price slipping 0.1%. Tin was untraded so far this morning.

“While China market participants are away on the national Golden Week holiday, the global macroeconomic backdrop remains precarious – with every twist and turn into the new trading month of October dangerously volatile,” Farida said.

Base metal prices down

• The three-month copper price fell $6.50 per tonne to $6,242.50 per tonne
• The three-month aluminium price slid $9.50 per tonne to $2,074.50 per tonne.
• The three-month zinc price dropped $13 per tonne to $2,643 per tonne.
• The three-month lead price dipped $3.50 per tonne to $2,027 per tonne.
• The three-month nickel price slipped $30 per tonne to $12,475 per tonne.
• Three-month tin was untraded.

Currency moves and data releases

• The dollar index was steady at 95.30 as at 9am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $84.97 per barrel as at 9am Shanghai time.
• In European data Monday, the United Kingdom’s manufacturing PMI beat expectations with a print of 53.8, but M4 money supply and net lending both missed forecasts, as did German retail sales at -0.1% and the Spanish manufacturing PMI at 59.7.
• Other European manufacturing PMIs were broadly in line with forecasts. The European Union’s unemployment rate was flat as predicted at 8.1%, although the Italian rate dropped to 9.7% from the downwardly revised 10.2% a month earlier.
• Today, Europe is releasing data on its producer price index and the Economic and Financial Affairs Council will be meeting in Brussels to discuss a range of financial issues.
• Additionally, the UK is coming out with its construction PMI and Spain its unemployment change report.
• In Washington DC today, US President Donald Trump is scheduled to speak about the United States-Canada-Mexico Agreement and US Federal Reserve Governor Randal Quarles is due to testify on the implementation of the Economic Growth, Regulatory Relief, and Consumer Protection before the Senate Banking Committee.