SMM Evening Comments (Jun 16): Base metals rallied on Fed’s additional support

SHANGHAI, Jun 16 (SMM) – SHFE nonferrous metals closed higher across the board on Tuesday, recovering from Monday’s collapse, as the return of monetary and fiscal stimulus into the spotlight calmed investor nerves over a spike in coronavirus cases.

Nickel surged 2.2% to lead the gains, aluminium jumped nearly 2%, tin rose 1.3%, zinc advanced 1.2%, copper and lead climbed 0.9%.

Their counterparts on the LME were also broadly higher as of 18:25 Beijing time.

Global stock markets rallied, while the US dollar nursed losses after the US Federal Reserve said Monday that it would buy individual corporate bonds and signaled a broader approach to corporate bond buying.

A Bloomberg report saying President Donald Trump’s administration is preparing a $1 trillion infrastructure proposal, will add to the optimism across the markets.

Fed Chairman Jerome Powell is due to testify before Congress on the central bank’s monetary policy maneuvers at 10 a.m. ET. on Tuesday.

Prior to that, US retail sales data, industrial and manufacturing production figures will be released.

Copper: The most-traded SHFE contract strengthened 0.9% to 47,150 yuan/mt, its highest close since January 23, the last trading day before the Chinese New Year holiday. The load-up of long positions primarily contributed to today’s rally in the contract.

The government of Chile, the world’s top copper producer, said on Monday it would extend a state of catastrophe in place since mid-March by 90 days as cases of coronavirus surged. The news boosted concerns over ore supply and helped fuel the price rally. The contract is expected to try to break above the 47,500 mark tonight.

Aluminium: The most-liquid SHFE contract gained 1.95% to end at 13,875 yuan/mt, sharply after notching its highest since January 23 at 13,910. Falling inventories and tight availability cemented morale among longs, while in the physical market, spot prices moved towards 14,000 after the expiry of the SHFE June contract on Monday.

Zinc: The liquidation of short positions primarily contributed to the rally in the most-active SHFE contract, which rose 1.19% to 16,540 yuan/mt, its highest close in more than a week. The contract is likely to move further above five-60 moving averages tonight.

Nickel: The most-traded SHFE contract closed 2.24% higher at 103,630 yuan/mt, extending overnight rebound driven by short-covering. It is likely to see further upside tonight.

Lead: The most-active SHFE contract extended its overnight rally from three-week lows, closing 0.88% higher at 14,260 yuan/mt. It plumbed its weakest since May 25 at 14,020 in early overnight trades.

Tin: The most-active SHFE contract rose 1.29% to end at 137,970 yuan/mt, returning above the five-10 day moving averages. It now faces pressure at 139,000.