[SMM Nickel Midday Review] Nickel prices fell on September 2, with the probability of a US Fed rate hike in September rising to 66.9%

SMM, September 2 (Nickel):

Macro and market news:

(1) Another hawkish voice joined the US Fed, with the probability of a September rate hike rising to 66.9%. Governor Barr said he would support a rate hike if inflation fails to ease further. Combined with Warsh's earlier hawkish signals, the market is now focused on the August CPI due on September 11—the most critical data before the September 15-16 FOMC meeting. Barclays now expects the Fed to hike rates once each in September and December.

(2) Global bond markets sold off across the board, putting risk assets under pressure. The 10-year US Treasury yield approached 4.79% (the highest since January 2025), while the 30-year stood at around 5.28%. The 10-year JGB yield broke above 3% (the first time since 1996). After Ueda's remarks, the probability of a BoJ rate hike in September surged to about 99%. This morning, the Nikkei 225 briefly plunged more than 1,700 points (-2.5%), and South Korea's KOSPI fell 2.19%. Overnight, the Dow fell about 450 points (-0.85%), gold tumbled more than 2.3%, and the US dollar index turned higher.

(3) Eurozone August CPI rose to 3.3% YoY, the highest since September 2023 (core 2.4%). An ECB rate hike of 25 bp next week is almost a done deal. US August ISM manufacturing PMI fell to 54.6, missing expectations but still marking the eighth consecutive month of expansion. July JOLTS job openings came in at 7.27 million, slightly below expectations, while June data was revised down sharply by nearly 200,000.

(4) China's August Caixin manufacturing PMI came in at 51.5, a two-month high and the ninth consecutive month above the 50 mark. Export new orders grew at the fastest pace in six months, but EXW prices were lowered for the first time this year.

Spot market:
On September 2, SMM #1 refined nickel averaged 127,250 yuan/mt, down 1,800 yuan/mt from the previous trading day. In terms of spot premiums, Jinchuan #1 refined nickel averaged 1,600 yuan/mt, flat from the previous trading day. Mainstream domestic brands of electrodeposited nickel ranged from -200 to 500 yuan/mt.

Futures market:
The most-traded SHFE nickel contract (2610) drifted lower in morning trading, closing the morning session at 126,690 yuan/mt, down 0.84%.

Short-term outlook:
The probability of a Fed rate hike in September has risen to 66.9%, and the global bond sell-off combined with a stronger US dollar is creating multiple headwinds. Nickel's own high inventory and weak demand picture remains unchanged. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 125,000-131,000 yuan/mt.