LIVE FUTURES REPORT 20/12: Most SHFE base metals prices move up on continued US-China trade talks; Al falls on Rusal sanction lifting

The United States and China held vice-ministerial level talks over the phone on Wednesday to further smooth out differences in trade affairs in preparation for their meeting in January.

Optimism over these improving relations between the two countries—long-engaged in a bitter trade spat this year—trumped a stronger dollar. The greenback stood at 97.03 as at 9.19am Shanghai time following a brief slump to 96.55 on Wednesday, a day which saw the US Federal Reserve raise interest rates by 25 basis points to 2.25-2.5%.

The central bank’s chairman Jerome Powell indicated that the board remains confident of the US economy staying strong in the near future, justifying the hike. Though the interest rate increase was widely expected, the Fed reduced its expected hikes for 2019 to two from three.

“The Fed hiked as expected, with the median dot plot now pointing to two hikes in 2019 and one in 2020. The combination of the changes to the dot plot and the statement suggest a less hawkish tone than previously, although perhaps to a lesser extent than market expectations,” ANZ Research said in a note on Thursday.

“The tone in the statement was balanced: they still expect growth in 2019 to justify hikes, but think they are near neutral and so have become data dependent. The Fed continues to think that financial conditions are easy and, importantly, see the balance-sheet un-wind on autopilot and not having any impact on markets,” ANZ Research added.

With the exception of aluminium, the base metals on the SHFE had shifted to positive territory this morning; Nickel’s most-traded May contract led the gains with a 0.7%, which was followed by a 0.4% increase in zinc’s most-traded February contract price.

The fundamental backdrop for nickel remains positive, according to Fastmarkets analyst Andy Farida.

The latest data from the International Nickel Study Group suggests the refined nickel market ran a deficit of 118,700 tonnes in January-October, up from a 86,500-tonne deficit in the corresponding period of last year.

Farida noted though that rising mine supply in 2018 could translate into higher output in 2019, weakening the support on prices.

Copper’s and lead’s most-traded February contract price both moved up by 0.3%, while tin’s most-traded May contract price was little changed with an increase of 0.03%.

Aluminium stood out from its peers, with its most-traded February contract price falling 0.1% following the US Treasury Department’s announcement on Wednesday that it would lift sanctions against Russian producer UC Rusal in 30 days.

Market participants expected the decision to put more downward pressure on the already depressed aluminium price.

Base metals prices

• The SHFE May nickel contract was up by 590 yuan ($86) per tonne to 89,970 yuan per tonne.
• The SHFE February zinc contract rose by 80 yuan per tonne to 21,040 yuan per tonne.
• The SHFE February lead contract increased by 45 yuan per tonne to 18,125 yuan per tonne.
• The SHFE May tin contract moved up by 50 yuan per tonne to 146,680 yuan per tonne.
• The SHFE February copper contract rose by 160 yuan per tonne to 48,250 yuan per tonne.
• The SHFE February aluminium contract fell by 15 yuan per tonne to 13,650 yuan per tonne.

Currency moves and data releases

• The dollar index was up slightly at 97.03 as at 9.19am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $56.72 per barrel as at 9.20am Shanghai time.
• In equities, the Shanghai Composite Index was down 0.8% to 2,528.73 as at 11.30am Shanghai time.
• In European data on Wednesday, Germany’s producer price index (PPI) for November-December was in line with expectations at 0.1%, but down from 0.3% previously.
• In the United Kingdom, the consumer price index (CPI) for November was in line with expectations at 2.3%, short of the previous reading at 2.4%. The UK’s core CPI was also in line at 1.8%, slightly lower than its previous reading of 1.9%. The country’s retail price index, at 3.2%, was in line with expectations and down from 3.3% previously.
• US data Wednesday revealed the current account deficit at -$125 billion, in line with expectations..
• In the US, National Association of Realtors reported that existing home sales rose in November to 5.32 million, higher than the expected 5.20 million and up from the previous month’s 5.22 million.
• Meanwhile, US crude oil inventories fell 0.5 million barrels in the week ended December 14, less than the forecast 2.7-million-barrel decline.
• On Thursday, the European Central Bank is due to report on its current account, while the UK will release a number of reports: retail sales, realized sales from the Confederation of British Industry, official bank rate, monetary policy summary, and asset purchase facility from the Bank of England
• In US releases on Thursday, the US Department of Labor will report on unemployment claims and the Federal Bank of Philadelphia will release data on manufacturing index.