SMM Evening Comments (Jun 9): SHFE base metals closed mostly higher amid optimism over economic recovery

SHANGHAI, Jun 9 (SMM) – SHFE nonferrous metals, except for zinc and lead, extended their gains on Tuesday, as investors continued to weigh up the prospects of economic recovery after the Covid-19 pandemic.

Aluminium remained the best performer with a gain of nearly 1.7%, copper and tin rose 1.2%, nickel advanced 0.8%, while zinc and lead both shed more than 0.1%.

Optimism about the reopening of the US economy continued to underpin stocks on Wall Street on Monday, and the S&P 500 returned to positive territory for 2020.

On the LME, nonferrous metals dropped across the board in early European trading hours on Tuesday, with all the six metals diving into negative territory as of 16:55 Beijing time, as the US dollar rebounded and oil prices pulled back.

The US dollar index, which measures the greenback against a basket of currencies, pared earlier losses as investors await the US Federal Reserve’s policy meeting on Tuesday and Wednesday. Oil prices, meanwhile, plunged, reversing earlier gains.

On the economic data front, seasonally adjusted GDP decreased 3.6% and employment fell 0.2% in the euro area during the first quarter of 2020, compared with the previous quarter, according to an estimate published by Eurostat on Tuesday. The decline in GDP was the sharpest decline observed since time series started in 1995.  

Copper: The most-traded SHFE July contract rose 1.18% on the day to end at 46,250 yuan/mt, after hitting the highest since late February at 46,490 yuan/mt earlier in the session. The contract has risen for three consecutive trading days, and will test the 46,500 mark.

Aluminium: The most-liquid SHFE July contract registered another solid gain on Tuesday, scaling its highest since February 21 at 13,650 yuan/mt before closing up 1.65% at 13,555 yuan/mt. The strong rally in futures forced spot prices in east China into discounts as the influx of foreign cargoes and sell-offs by some smelters eased availability tightness, which may hamper upside potential in SHFE aluminium.

Zinc: The most-active SHFE July contract slipped to an intraday low of 16,460 yuan/mt before ending down 0.15% at 16,505 yuan/mt.

Nickel: The most-traded SHFE August contract hovered in a tight range during the daytime trading session, holding onto overnight gains to end up 0.83% at 104,700 yuan/mt. It hit the highest in more than two weeks at 105,490 yuan/mt in overnight trading, and whether it could break above 105,000 convincingly will come under scrutiny.

Lead: The most-active SHFE July contract erased earlier gains to close 0.14% weaker at 14,340 yuan/mt.

Tin: The most-active SHFE August contract climbed on the influx of longs in the daytime session, notching the highest in about four months at 138,390 yuan/mt before closing up 1.16% at 138,240 yuan/mt. Whether it could remain above 138,000 will come under scrutiny in the short term, and next resistance is seen at 140,000.