SMM Morning Comments (Jul 8): Shanghai base metals were mostly higher as fresh data showed an improving economic outlook in the euro zone

SHANGHAI, Jul 8 (SMM) — Shanghai base metals traded mixed on Thursday morning as the coronavirus situation weighed on investor sentiment. Meanwhile, their counterparts on the LME fell for the most part.

Shanghai base metals mostly advanced in overnight trading. Nickel climbed 0.63%, copper rose 0.07% and lead increased 0.16%, while tin remained unchanged, zinc declined 0.2% and aluminium weakened 0.53%,

The LME complex ended mostly higher on Wednesday. Copper added 1.45%, tin increased 0.48%, zinc went up 0.94% and nickel strengthened 1.69%, while aluminium decreased 0.76% and lead fell 0.09%.

Copper: Three-month LME copper rose 1.45% to end at $9,445/mt on Wednesday, and is likely to trade between $9,380-9,460/mt today.

The most-active SHFE 2108 copper contract went up 0.68% to close at 69,160 yuan/mt in overnight trading, and it is expected to move between 68,700-69,300 yuan/mt today, while spot discounts will be seen at 110–180 yuan/mt.

Last night, it was announced that the number of job vacancies in the US reached a record 9.21 million in May. Enterprise recruitment continued to face difficulties and the job market remained weak. According to the minutes of the Fed meeting in June in the early morning, Fed officials discussed how to start reducing the stimulus plan at the meeting. Many participants mentioned that in view of the data received, they expected that the conditions for starting to slow down the asset purchase speed would be realised earlier than originally expected, but at the same time, policy makers still thought that the uncertainty was high. After the meeting, the US dollar index rose to a three-month high at night, and the trend of copper futures was relatively flat.

Aluminium: Three-month LME aluminium fell 0.74% to close at $2,487.5/mt on Wednesday. It is expected that the contract will trade between $2,480-2,560/mt today. 

The most-liquid SHFE 2108 aluminium contract fell 0.34% to settle at 18,790 yuan/mt on Wednesday night. It is expected that the contract will trade between 18,700-19,100/mt today.

Overnight, the European Central Bank may announce a new inflation target of 2% on Thursday and allow moderate overshoot. The minutes of the Federal Reserve meeting in June showed that many officials predicted that the time to reach the code reduction threshold might be earlier than expected. The State Council of China has mentioned "timely RRR reduction" after more than a year, and Goldman Sachs expects that PBOC will lower deposit rate within a few weeks. Macroscopically, there is a signal of loosening, which may stimulate commodities to keep high and fluctuate strongly. The changes of domestic aluminium ingot inventories today and its influence on market sentiment will be monitored today.

Zinc: Three-month LME zinc rose 0.94% to close at $2,955.5/mt on Wednesday. Zinc stocks at LME-listed warehouses fell 550 mt to 251,575 mt. US stocks closed higher overnight, and the Nasdaq and S&P index reached a record high. However, the yield of US 10-year Treasury bonds fell below 1.30%, hitting a four-month low, and the number of job vacancies reached a record high in May. The market worried that the conditions for tightening policies might appear ahead of schedule. The contract is likely to trade between $2,910-2,960/mt today.

The most-liquid SHFE 2108 zinc contract rose 0.54% to end at 22,305 yuan/mt in overnight trading. On fundamentals, the low social inventories boosts the upward trend of zinc prices, but with the arrival of reserved goods, social inventories are likely to pile up, which is expected to suppress zinc prices. The SHFE zinc contract is expected to move between 21,700-22,200 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be 230-240 yuan/mt.

Lead: Three-month LME lead settled 0.15% lower at $2,289.5/mt on Wednesday. Overnight, the US dollar index fluctuated within a narrow range and rose slightly. There was no big surprise at the Fed policy meeting, and the macro sentiment was stable. LME lead stocks continued to decline. The contract will test support from five-day moving average today.

The most-active SHFE 2108 lead contract went up 0.16% to close at 15,920 yuan/mt on Wednesday night. The domestic lead market is still in the transitional period of the peak season, and the consumption demand of batteries has not recovered significantly. The contract will test support from 15,900 yuan/mt today.

Tin: Three-month LME tin closed up 0.48% at $31,720/mt on Wednesday.

The most-liquid SHFE 2108 tin contract remained unchanged at 216,340 yuan/mt on Wednesday night. Pressure above will be seen from 219,000 yuan/mt today. Support below will be seen from 214,000 yuan/mt today.