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SMM Evening Comments (Feb 5): Copper extended rally on eased risk aversion
iconFeb 5, 2020 18:56
Copper built on gains from the previous session with a 1.09% increase

SHANGHAI, Feb 5 (SMM) – SHFE nonferrous metals ended mixed on Wednesday, with nickel leading the increase with a rise of 1.43%. 

Copper built on gains from the previous session with a 1.09% increase. Aluminium climbed 0.29%. Zinc lost 0.09%, lead slipped 1.09%, while tin went flat. 

The ferrous complex traded higher as rebar added 0.37%, hot-rolled coil increased 0.46%, stainless steel advanced 0.38%, coke went up 0.45%, while iron ore continued to fall by 1.53%. 

The market anticipated that more supportive measures would help to offset the impact of coronavirus outbreak on the domestic economy, after China's central bank pumped 400 billion yuan into the banking system on Tuesday. 

The SHFE has halted its night trading session since Monday to control the virus outbreak.

Copper: The most-traded SHFE 2003 contract extended increase from Tuesday as risk aversion sentiment eased after China central bank’s huge cash injections into the market. The contract hit an intraday high of 45,630 yuan/mt and closed the day 1.09% higher at 45,550 yuan/mt. Copper prices will see some further upward potential this week, but the price rally will be capped on the back of broad weakness in the global economy. The release of the US ADP job data tonight will likely guide the movement of copper prices on Thursday. 

Zinc: The most-liquid SHFE 2003 contract stabilised around 17,300 yuan/mt and finished the trading day slightly lower at 17,280 yuan/mt. Limited capital flows kept zinc prices at low levels, but support is seen at 17,000 yuan/mt. An absence of negative development on fundamentals may also underpin prices. Cautious investors are likely to see the contract rangebound at lows in the near term. 

Nickel: A buildup of long positions lifted the most-liquid SHFE 2004 contract above the five-day moving averages, to an intraday high of 106,000 yuan/mt, before the contract finished the day 1.43% higher at 105,130 yuan/mt. It gained for the second consecutive day after the slump on Monday. The K-indicator climbed above the Bollinger lower band. Pressure from the five-day moving average will be monitored tomorrow. 

Lead: The most-active SHFE traded sideways along with the daily moving averages in early trades, before loaded-up shorts weighed it to a session low of 14075 yuan/mt, and settled it 1.09% lower on the day at 14,105 yuan/mt. It is unlikely to fall below 14,000 yuan/mt in the near term, but the upside room may also be limited. 

Tin: The most-liquid SHFE 2006 contract held stable at low levels, as it retreated after loaded-up longs sent it to an intraday high of 132,340 yuan/mt. The contract ended flat on the day at 131,690 yuan/mt, staying below all moving averages. Support below is seen from 130,000 yuan/mt, with resistance above between 133,000-134,000 yuan/mt.


Evening Comments
Futures movement

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