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With the exception of aluminium, which was little changed with a slightly upward bias, the SHFE base metals were all lower on Wednesday morning. This despite the dollar weakening significantly overnight.
The dollar index, at 96.65 at as 11.18am Shanghai time, is down from a two-month high of 97.20 reached on Tuesday after investors began to take profits following an eight-day rally in the US currency.
“With a tentative deal averting a US government shutdown reached and positive noise from the ongoing US-China trade talks, Wall Street surged more than 1.5% higher overnight, the US JOLTS job opening also posted much higher-than-expected gain to USD 7.335 million, adding fuel to the fire,” Jeffrey Halley, senior market analyst from foreign exchange company Oanda, said in a morning note.
“The positive backdrop saw investors rotating out of the USD bringing its eight-day rally to an end,” Halley added.
Adding to the positive sentiment across markets was encouraging headlines on the trade negotiations between China and the United States, with US President Donald Trump saying overnight that “If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” speaking of the looming March 1 deadline when US tariffs on $200 billion of Chinese imports increase to 25% from 10%.
Yet despite this, investors seem to be holding back from getting overly eager before US-China trade talks officially get underway in Beijing on Thursday and this caution is putting the base metals under pressure, a senior macroeconomic analyst based in Shanghai told Fastmarkets MB.
Nickel prices on the SHFE fell for a second consecutive day, reversing the strong gains witnessed on Monday after iron ore futures prices on the Dalian Commodity Exchange surged.
The most-traded May nickel contract on the SHFE stood at 98,550 yuan ($14,535) per tonne as at 10.44am Shanghai time, up by 0.6% or 630 yuan per tonne from Tuesday’s close. The contact had reached a high of 101,950 yuan per tonne on Monday, tracking a jump in the most-traded May iron ore contract on the DCE to a three-month high on the same day.
The weaker tone in iron ore prices comes as market participants question whether a 17% price increase since January 25 is an overreaction to the news that Brazilian producer Vale SA will suspend operations at several of its mines.
Tin, zinc, lead and copper were also weaker this morning, while aluminum was little changed.
“Inventory accumulated around the Lunar New Year holidays, while domestic spot aluminum trading remains inactive with the majority of downstream plants not yet resuming operations due to lackluster demand,” Chinese broker Guotai Junan said in a morning note. Base metals prices
Currency moves and data releases