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Evening Comments (Jan 2): Base metals mostly lower to start 2020
Jan 2, 2020 18:24CST
This came despite Beijing’s latest policy easing and hopes for a trade deal between Washington and Beijing

SHANGHAI, Jan 2 (SMM) – Shanghai base metals closed mostly lower on the first trading day of the new year, ignoring broader market euphoria over Beijing’s latest policy easing and hopes for a trade deal between Washington and Beijing.

Lead shed 1.4% to lead the losses, zinc fell 0.8%, nickel dropped 0.7%, and copper edged down 0.1%, while aluminium closed flat. Tin rose 0.2%.

The ferrous complex, except for coking coal and iron ore, also drifted lower. Stainless steel tumbled 3.8% due to the build-up of short positions, hot-rolled coil slipped 0.5%, rebar declined 0.3% and coke lost 0.2%.

The People’s Bank of China announced Wednesday on its website that it was going to lower the reserve requirement ratio for banks by 50 basis points, effective from January 6. This is estimated to release around 800 billion yuan ($114.91 billion) in funds to shore up the slowing economy.

China’s factory activity continued to expand last month, albeit at a slower clip as new orders softened, a private survey showed on Thursday. Caixin Purchasing Managers’ Index (PMI) for China’s manufacturing sector came in 51.5 for December, versus 51.8 in November. The 50 mark separates expansion in contraction in PMI readings.

On the trade front, US President Donald Trump said in a tweet on Tuesday that he will sign a “phase one” trade deal with China at the White House on January 15.

Copper: The most active SHFE 2003 contract hovered to close the day 0.14% lower at 49,350 yuan/mt. Whether it would track gains in its LME counterpart and remain above 49,300 yuan/mt will come under scrutiny tonight.

Aluminium: The most traded SHFE 2002 contract gave back earlier gains to close the day flat at 14,090 yuan/mt, as data showed an increase in social inventories of primary aluminium ingots in China due to greater arrivals and weaker demand. Inventories are likely to maintain the growth ahead of the Lunar New Year holiday, which will weigh on prices. SHFE aluminium is likely to fall to test the 20-day moving average tonight.

Zinc: The most active SHFE 2002 contract eased 0.78% on the day to end at 17,880 yuan/mt, as longs exited from the market. A strong LME counterpart following Beijing’s RRR cut, is likely to offer some support to SHFE zinc tonight.

Nickel: The most traded SHFE 2003 contract slipped to a two-week low of 109,820 yuan/mt, before it recouped some losses to end the day 0.68% weaker at 111,310 yuan/mt. Resistance at a confluence of the five- and 10-day moving averages will come under scrutiny tonight.

Lead: The most active SHFE 2002 contract fell for a third straight trading day to post its lowest close in more than a week at 14,910 yuan/mt, down 1.36% on the day. SHFE lead is likely to extend its decline tonight, in view of its weak LME counterpart. SHFE lead is unlikely to return above 15,000 yuan/mt.

Tin: The most traded SHFE 2006 contract dropped to a low of 133,820 yuan/mt, before it recovered to close the day 0.19% firmer at 135,200 yuan/mt. But it still sits below all near-term moving averages.  

Evening comments

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