SMM Morning Comments (Mar 16): Base metals weakened despite another Fed rate cut

SHANGHAI, Mar 16 (SMM) – London base metals cruised mostly lower in early morning trade on Monday, even as the US Federal Reserve slashed its benchmark interest rate to zero and launched a massive quantitative easing program in an emergency move overnight.

Shanghai base metals, meanwhile, were mostly higher. Nickel jumped more than 2%.  

London industrial metals rallied broadly on Friday, boosted by further economic measures by Beijing and expectations of a stimulus package from the US.

LME metals later eased to close the day mostly higher, with nickel leading the gains with a 3.6% surge. Zinc jumped 1.8%, aluminium rose 1.7%, and copper advanced 0.3%, while lead fell 0.7% and tin dropped 1.7%.

China said late on Friday that it was cutting for the second time this year the amount of cash some banks must hold as reserves, releasing 550 billion yuan ($79 billion) in liquidity.

After a brutal trading session on Thursday, financial regulators of countries including South Korea, Italy and Spain, issued a ban on short selling, which also helped calm investors’ nerves on Friday.

The SHFE night trading session remained suspended to contain the spread of the virus.

Copper: Three-month LME copper rebounded from a new more than three-year trough to an intraday high of $5,589/mt, before paring some gains to end at $5,453.5/mt. Today, LME copper is likely to trade between $5,400-5,460/mt with the most-liquid SHFE 2005 contract at 43,200-43,600 yuan/mt. Spot premiums are seen at 20-60 yuan/mt on the day of delivery for the March contract.

Aluminium: Three-month LME aluminium rose past the $1,700/mt mark before erasing some gains to end at $1,690/mt, to produce a weekly gain of 0.3% and end a 10-week losing streak. LME aluminium is likely to move between $1,670-1,710/mt today, with the most-active SHFE 2005 contract trading at 12,800-13,100 yuan/mt.

Zinc: Three-month LME zinc climbed to its highest in two weeks at $2,045/mt, near the 20-day moving average, before easing to end at $1,982/mt. It remains under pressure from the five- and 10-day moving averages, but supported by the lower Bollinger band. Zinc stocks across LME-approved warehouses decreased 300 mt, or 0.4% to 74,600 mt on Friday. LME zinc is expected to trade at $1,940-1,990/mt today with the most-traded SHFE May contract hovering between 15,400-15,900 yuan/mt. Spot premiums for domestic 0# Shuangyan are seen at a maximum of 20 yuan/mt over the SHFE April contract.

Nickel: Three-month LME nickel broke through the lower Bollinger band and several moving averages to an intraday high of $12,815/mt, near the 40-day moving average, before easing to end at $12,305/mt. LME nickel returned below most of the near-term moving averages, and whether it could hold above the five-day one at $12,400/mt will come under scrutiny today.

Lead: Three-month LME lead gave up all the gains from a previous rally to end at $1,752/mt. LME lead remains in a downtrend, and may see further downside in the short term.

Tin: Three-month LME tin came off from an intraday high of $16,520/mt, near the five-day moving average, erasing all earlier gains to close at $15,800/mt. Support is seen at $15,500/mt.