SMM Morning Comments (Apr 1): Shanghai base metals opened mostly higher after Beijing pledged more stimulus

Published: Apr 1, 2020 09:52
Shanghai base metals opened mostly higher on Wednesday morning, as Beijing said that it will roll out a set of fiscal and financial policies to expand domestic demand, assist businesses reopening, sustain employment, and help all types of businesses to weather this difficult time.

SHANGHAI, Apr 1 (SMM) – Shanghai base metals opened mostly higher on Wednesday morning, as Beijing said that it will roll out a set of fiscal and financial policies to expand domestic demand, assist businesses reopening, sustain employment, and help all types of businesses to weather this difficult time.

 

Measures to be introduced include allocating more local government bond quota in advance as per due procedures, and intensifying inclusive financial support to micro, small and medium-sized enterprises, according to plans made at the State Council's executive meeting chaired by Premier Li Keqiang on Tuesday.

 

Positive Chinese economic data also helped improve market sentiment. Official purchasing managers’ index (PMI) released on Tuesday showed that China’s manufacturing activity unexpectedly expanded in March, from a collapse in February.

 

Overnight on the LME, base metals, except for aluminium, closed higher overnight. Copper surged 3.7% on the day to lead the gains, lead jumped 2.8%, zinc climbed 2.3%, nickel advanced 1.4% and tin rose 0.9%. Aluminium edged down 0.2%.

The SHFE kept its night trading session suspended.

 

The US dollar reversed earlier gains against a basket of major currencies on Tuesday, pressured by the Federal Reserve’s latest measures to address liquidity problems caused by the economic fallout from the coronavirus pandemic. The Fed on Tuesday broadened the ability of dozens of foreign centrals banks to access US dollars during the coronavirus crisis by allowing them to exchange their holdings of US Treasury securities for overnight dollar loans.

 

On Wall Street, stocks rebounded on the last day of the first quarter, to wrap up the worst first quarter on record for the Dow and S&P 500 spurred by the coronavirus sell-off.

 

Oil prices rose on Tuesday after US President Donald Trump and Russian President Vladimir Putin agreed to talks aimed at stabilizing energy markets. But the American Petroleum Institute (API) reported late Tuesday that US crude supplies rose by 10.5 million barrels for the week ended March 27.

 

Copper: Three-month LME copper hit a two-week high of $4,971/mt in North American trading hours, before finishing the day sharply higher at $4,930/mt. It registered a third straight month of decline, shedding 11.8% on the month, the biggest drop in more than five years.

 

Aluminium: Three-month LME aluminium extended its decline and bucked the uptrend across nonferrous metals on Tuesday. It slipped to its lowest since April 2016 at $1,507/mt in the North American trading session, before it recovered some ground to close the day lower at $1,525.5/mt, to produce a monthly decline of 10.3%, the biggest monthly percentage decrease in almost a decade.

 

Zinc: Three-month LME zinc resumed its rally on Tuesday, climbing to close the day at $1,906.5/mt, its highest close in more than two weeks and near the 20-day moving average. It gained for five days in the past six days. LME zinc wrapped up March with a 5.7% decline, marking a fifth straight month of losses. LME zinc is expected to move at $1,870-1,920/mt today, with the most-traded SHFE May contract at 14,900-15,400 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen higher at 60-90 yuan/mt over the SHFE April contract, as traders stockpile on expectations that Beijing will cut taxes and fees.  

 

Nickel: Three-month LME nickel rose swiftly to its highest in more than a week at $11,500/mt in North American trading hours, before it closed the day higher at $11,470/mt, to produce a monthly decline of 6.2%. LME nickel weakened for six months in the past seven months. It has shrugged off a resistance confluence of the five- and 10-day moving averages, moving to the range between $11,200-11,500/mt.

 

Lead: Three-month LME lead rose sharply on Tuesday, breaking through the 20-day moving average and extending its recent rally, and closed at $1,747/mt, its highest close since March 13. It shed 5.5% on the month, marking a fifth straight month of losses.

 

Tin: Three-month LME tin reversed earlier losses to close the day at $14,535/mt, its highest close since March 16. It slumped 10.3% on the month, the biggest monthly percentage decline since August 2015. LME tin now faces resistance at $15,000/mt.

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