LIVE FUTURES REPORT 21/12: SHFE base metals prices rise on weaker US dollar; Al flat

The dollar index was at 96.42 as at 9.09am Shanghai time compared with 97.03 at around the same time on Thursday.

The weaker tone in the US currency follows disappointing data releases on Thursday; the Philadelphia Fed manufacturing index fell to its lowest level since August 2016 at a seasonally adjusted 9.4 in December, down from 12.9 in November.

Additionally, the weekly unemployment claims stood at 214,000 in the week ending December 15, a level slightly below the forecast 216,000, but up 8,000 from the previous week’s reading of 206,000.

As much as US Federal Reserve Chairman Jerome Powell emphasized the boards’ confidence over a sustained strong economic growth for the US, pushing them to raise interest rates again this week, market participants were quick to note his less hawkish statements in the central bank’s accompanying statement and indications of fewer than expected increases in 2019.

Adding further downward pressure to the dollar was news that US President Donald Trump would not sign a temporary government funding resolution unless it included billions of dollars to build a wall along the US-Mexico border, heightening concerns over a potential government shutdown. This was followed by more political turmoil after US Defense Secretary James Mattis resigned from his post over disagreements with Trump.

“We’re seeing the US dollar struggling across the board after USDJPY moved sizably lower leaving the critical 112 level in its rear-view mirror as the currency traders are experiencing a post-Fed case of ‘irritable Powell syndrome’,” said Oanda’s Asian Pacific head of trading Stephen Innes.

The weaker dollar allowed for most of the SHFE base metals prices to push higher this morning; sister metals zinc and lead’s most-traded February contract price rose 0.8% and 0.6% respectively, tin’s most-traded May contract increased by 0.6%, copper’s most-traded February contract price and nickel’s most-traded May contract price both went up by 0.3%.

Yet these price gains could be capped by wider market concerns over simmering geopolitical tensions between the US and China; concerns that the US Justice Department’s indictment of two Chinese nationals over cyber espionage could undermine the recent positive developments seen in US-China trade talks are somewhat dampening risk-on sentiment in the market.

Aluminium remained an outlier as its most-traded February contract price was flat on Friday, with participants in this market mulling the possible effects of the decision by the US Department of the Treasury’s Office of Foreign Assets Control to lift sanctions against Russian producer UC Rusal by January.

Base metals prices

• The SHFE May nickel contract was up by 250 yuan ($36) per tonne to 90,330 yuan per tonne.
• The SHFE February zinc contract rose by 165 yuan per tonne to 21,110 yuan per tonne.
• The SHFE February lead contract increased by 105 yuan per tonne to 18,150 yuan per tonne.
• The SHFE May tin contract moved up by 810 yuan per tonne to 146,660 yuan per tonne.
• The SHFE February copper contract rose by 150 yuan per tonne to 48,370 yuan per tonne.
• The SHFE February aluminium contract was flat at 13,690 yuan per tonne.

Currency moves and data releases

• The dollar index was at 96.42 as at 9.09am Shanghai time.
• In other commodities, the Brent crude oil spot price was at $54.96 per barrel as at 9.10am Shanghai time.
• In equities, the Shanghai Composite Index was down 1% to 2,511.28 as at 10.55am Shanghai time.
• In data on Thursday, the EU’s current account surplus rose to €23 billion ($26.3 billion) in October, up from €17.6 billion in the prior month and surpassing the forecast €18.4 billion.
• Meanwhile, the UK’s retail sales rose more than expected in November, rising 1.4% from October and beating economists’ forecasts for a month-on-month gain of 0.3%.
• In US data releases on Thursday, the Philadelphia Fed manufacturing index fell to a seasonally adjusted 9.4 in December, down from 12.9 in November to reach the lowest level since August 2016. Weekly unemployment claims, at 214,000, were slightly below the forecast 216,000.
• The US Energy Information Administration also reported that domestic supplies of natural gas declined by 141 billion cubic feet for the week ended December 14, more than the estimated 136-billion-cubic-foot decline and higher than the fall of 77 billion cubic feet recorded in the previous week.
• Overnight, the UK reported December GfK consumer confidence at -14, in line with expectations and lower than the -13 index reading in November. The UK will publish later today data pertaining to its current account, final gross domestic product, public sector net borrowing, revised business investment and the Bank of England quarterly bulletin.
• Germany is due to release its GfK Consumer Climate report and France its consumer spending data later today.
• Later on Friday, the US will release reports on final gross domestic product (GDP) and durable goods orders.