Evening Comments (Dec 27): Copper steadied at 8-month high on strong data, RRR cut expectations

SHANGHAI, Dec 27 (SMM) – Shanghai copper prices steadied around eight-month highs on Friday, as investor sentiment was boosted by upbeat Chinese economic data and expectations of a cut to bank reserve requirements.

Supporting SHFE copper was also its strong LME counterpart, which posted a higher open and notched the highest in almost eight months after returning from a two-day Christmas break.

SHFE copper added 0.2% on the day, and zinc rose 0.4%. Lead closed flat, while aluminium shed 0.4%, tin fell 0.5% and nickel tumbled 2.1%.

Stainless steel tracked losses in nickel and shed 0.2% on the day, while other ferrous futures cruised higher. Iron ore led the gains with a 1.2% increase, as the latest round of heavy smog eased. Rebar climbed 1.1%, hot-rolled coil advanced 0.9%, coke gained 0.5% and coking coal increased 0.3%.

Data from China’s National Bureau of Statistics (NBS) revealed on Friday that profits at China's industrial firms rose 5.4% from a year earlier in November, marking the biggest increase in eight months and breaking a three-month declining streak.

Chinese Premier Li Keqiang said earlier this week the government will consider rolling out more measures, including broad-based and "targeted" cuts in the reserve requirement ratio (RRR) to lower financing costs for the real economy.

On the trade front, China was in close touch with the US on signing a Phase 1 trade deal, the commerce ministry said on Thursday, adding that both sides were still going through necessary procedures before the signing. That came after US President Donald Trump said Tuesday the deal is “getting done,” adding there will be a signing ceremony with Chinese leader Xi Jinping.

Copper: The most active SHFE 2002 contract hovered around the daily moving average during the daytime session, and closed the trading day 0.18% firmer at 49,730 yuan/mt. Four consecutive days of gains have sent SHFE copper above all near-term moving averages. Whether it could remain above 49,700 yuan/mt will come under scrutiny tonight.

Aluminium: The most traded SHFE 2002 contract resided around one-week lows, and ended the day at 14,075 yuan/mt.

Zinc: As shorts trimmed positions, the most active SHFE 2002 contract rallied above the five- and 20-day moving averages during the daytime session, and gained 0.36% on the day to close at an intraday high of 17,960 yuan/mt. It is likely to test pressure at 18,000 yuan/mt tonight.

Nickel: The most traded SHFE 2003 contract dropped 2.09% on the day to end at 109,990 yuan/mt, the lowest close in more than a week. It now faces resistance at the five-day moving average, and whether it could hold above the middle Bollinger band at 110,000 yuan/mt will come under scrutiny tonight.

Lead: The most active SHFE 2002 contract held in a 50 yuan/mt range during the daytime session, supported by the daily moving average. It ended the trading day flat at 15,235 yuan/mt, indicating that its recent rally is running out of steam. SHFE lead is likely to track losses in LME lead and test support at the five-day moving average tonight.

Tin: The most traded SHFE 2005 contract fluctuated in a wider range during the daytime session, to end the day 0.5% weaker at 137,840 yuan/mt. Support is seen at 137,500 yuan/mt.