Singapore 19/09/2016 - Copper contracts on the Shanghai Futures Exchange and the London Metal Exchange headed in different directions during Asian trading hours on Monday with short-covering lifting SHFE copper prices as Chinese investors return from Mid-Autumn festival holidays.
The most active SHFE November contract rose 400 yuan to 37,130 yuan per tonne, with around 80,000 lots changing hands so far. Open interest was at about 191,000 positions, down from 199,982 positions at Wednesday’s close. Chinese markets were closed for holidays last Thursday and Friday.
In contrast, the LME three-month copper price dropped $46.50 per tonne to $4,741.50 per tonne so far, with about 2,300 lots changing hands on Select so far.
After the holidays, SHFE copper is expected to open higher before easing thereafter, China’s Mailyard Futures said on Monday morning.
Copper needs more positive factors than just the peak demand season to drive it higher, said the broker who suggested clients sell SHFE copper at around 37,600 yuan. September-October is typically the traditional peak period for demand in China.
Investors are expected to focus on the US Federal Reserve two-day meeting which will conclude on Wednesday.
Majority of market participants still do not see a Fed rate hike happening in September though the probability of this taking place in December have increased after better-than-expected inflation data last Friday.
“This might just mean we get a bigger relief rally in the face of the ‘no change’ that we and most of the market expects [on] Wednesday night. A rise in rate would be a major market shock,” National Australia Bank said on Monday morning.
The Fed funds futures market has assigned implied probabilities of September and December rate hikes at 12 percent and 54.4 percent respectively on Friday, according to the CME Group Fedwatch tool. A day ago, majority had expected a rate hike to happen only next year.
US CPI month-over-month in August exceeded expectations at a 0.2 percent uptick, 0.1 percent was called for. Core CPI – excluding food and energy costs – also bested the forecast with a 0.3 percent gain, while only a 0.2 percent increase was projected.
“We see the CPI figures as not being enough for a September Fed hike, but leaving a December hike odds-on and bolstering the case for drawing some battle lines, shifting the market away from liquidity-driven support to the economic fundamentals. That’s an environment where volatility will remain elevated,” ANZ Research said on Monday morning.
It is a quiet day for data with mainly the German Buba monthly report and US NAHB housing market index due later today.
In currencies, the US dollar index fell 0.09 percent to 95.95 so far on Monday.
In other commodities, the Brent crude oil spot price rose 0.89 percent to $46.39 per barrel, and the Texas light sweet crude oil increased 1.23 percent to $43.70 recently on Monday.
In equities, the Shanghai Composite gained 0.55 percent to 3,019.35 so far in the day.
In other metals, the SHFE November aluminium contract rose 50 yuan to 11,925 yuan, while November zinc eased 10 yuan to 17,560 yuan.
SHFE November lead increased 125 yuan to 14,195 yuan, and January nickel climbed 700 yuan to 78,980 yuan. January tin surged 1,250 yuan to 124,000 yuan.
On the LME, other base metals were mostly higher during Asian trading hours on Monday on Select.
Nickel was last at $9,950, up $225, and aluminium gained $0.50 to $1,575. Zinc increased $12 to $2,227, while lead slipped $6.50 to $1,930. Tin was up $50 to 19,150.