LIVE FUTURES REPORT 10/01: SHFE base metals prices under pressure after disappointing China data

The recent positivity pervading the base metals market following trade developments between the United States and China was dented by renewed concerns of an economic slowdown in the latter after the release of disappointing inflation readings earlier this morning.

China’s producer price index (PPI) rose 0.9% year on year in December 2018, which was well short of an expected 1.6% gain and down from the 2.7% year-on-year increase registered in the month prior.

Meanwhile, the country’s consumer price index (CPI) rose 1.9% year on year last month, below an expected 2.1% gain and down from the 2.2% year-on-year gain seen in the preceding month.

Both indices hit their lowest growth rates in over two years.

The disappointing data more than offset the recent positivity stemming from trade headlines and a weaker US dollar.

The three-day trade talks between Chinese and US delegates ended on a generally positive note on Wednesday, with China reportedly agreeing to increase imports of US energy, manufactured and agricultural goods.

“Though the official word from the Office of the US Trade Representative was fairly bland (a formal statement is promised on Thursday morning US time). The [Wall Street Journal] reports that the two sides are making progress toward an agreement but leaving the thorniest issues to be resolved in higher-level talks,” Ray Attrill, head of FX strategy at the National Australia Bank, said in a morning note.

In currencies, the dollar continued to edge lower following the release of the minutes from the US Federal Open Market Committee’s (FOMC) December meeting, which reiterated the message that monetary policy needs to flexible and can be put on hold for now.

As a result, the dollar stood at 95.09 as at 11.13am Shanghai time, down from a reading of 95.81 on Wednesday morning.

Despite this, the base metals, with the exception of nickel, were all down this morning.

The most-traded March copper contract price on the SHFE dropped at 47,490 yuan ($6,953) per tonne as at 11.12am Shanghai time, down 190 yuan per tonne from Wednesday’s close.

Nickel was the only metal to shrug off the weaker economic data out of China and record any gains this morning; the most-traded May nickel contract price rose 380 yuan per tonne to 91,720 yuan per tonne at 11.12am Shanghai time.

“Nickel prices have found some technical support, including multiple positive headlines, weaker US dollars, as well as uptick of nickel price on the London Metal Exchange,” Guotai Junan Futures said.

Base metal prices

• The SHFE March copper contract price dropped by 190 yuan per tonne to 47,490 yuan per tonne.
• The SHFE March aluminium contract price slid by 60 yuan per tonne to 13,415 yuan per tonne.
• The SHFE March zinc contract price fell by 160 yuan per tonne to 20,440 yuan per tonne.
• The SHFE February lead contract price edged down by 135 yuan per tonne to 17,435 yuan per tonne.
• The SHFE May tin contract price moved down by 270 yuan per tonne to 146,630 yuan per tonne.
• The SHFE May nickel contract price rose by 380 yuan per tonne to 91,720 yuan per tonne.

Currency moves and data releases

• The dollar index was down 0.06% to 95.09 as of 11.12am Shanghai time.
• In equities, the Shanghai Composite was up 0.23% to 2550.08 at morning close.
• In European data on Wednesday, the German trade surplus widened more than expected to €19 billion ($21.8 billion) in November 2018, compared with the forecast €17.9 billion. Italian unemployment for the same month stood at 10.5%, unchanged from previously. Unemployment in the eurozone fell in November 2018 to a rate 7.9%, down from 8% previously.
• In US data on Wednesday, crude oil inventories fell by 1.7 million barrels to 439.7 million barrels in the week ended January 4, which was lower than an expected 2.8-million-barrel decline.
• In data on Thursday, China’s CPI rose 1.9% year on year in December, below an estimated increase of 2.1%. The country’s PPI for the same month was similarly lower than expected with a 0.9% year-on-year gain – an increase of 1.6% had been forecast.
• Later, we have European data that includes French industrial production, Italian retail sales and the European Central Bank’s monetary policy meeting accounts.
• US releases due on Thursday include unemployment claims and natural gas storage.
• In addition, FOMC members James Bullard and Charles Evans as well US Federal Reserve chairman Jerome Powell are speaking.