ASIA METALS - SHFE copper down after weaker-than-expected Chinese PMI

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Vivian Teovivian.teo@fastmarkets.comJoint News Editor - Asia

Singapore 03/05/2016 - Copper on the Shanghai Futures Exchange fell during Asian trading hours on Monday after the release of weaker-than-expected Chinese manufacturing purchasing managers’ index (PMI).

The most active SHFE July copper contract had risen earlier in the day, supported by the slump in the US dollar, but started heading south after the April Caixin manufacturing PMI was announced. The contact fell 60 yuan to 37,600 yuan, with around 86,000 lots changing hands so far on Tuesday. Open interest was recently around 272,000 positions, up from 265,734 positions at Friday’s close.  China was closed for May Day holiday on Monday.

The April Caixin manufacturing PMI came in at 49.4, below the forecast of 49.8 and March’s 49.7.

The PMI signalled further marginal deterioration in operating conditions in April with all of the index’s categories indicating worsening month-on-month conditions, said Caixin Insight Group.

“The fluctuations indicated the economy lacks a solid foundation for recovery and is still in the process of bottoming out. The government needs to keep a close watch on the risk of a further economic downturn,” said He Fan, chief economist at Caixin Insight Group.

Over the weekend, China released its official April manufacturing PMI which read 50.1, down from 50.2 in March while missing its 50.3 forecast. But it was still above the 50-point mark that separates expansion in activity from contraction.

Base metal prices had rallied in mid-April following better-than-expected March Chinese economic data, though market watchers cautioned against over-optimism as first quarter Chinese data are sometimes distorted by seasonal factors owing to Chinese New Year holidays.

In currencies, the US dollar index sank to a 15.5-month low of 92.47 on Tuesday following the release of softer-than-expected US data on Monday. The index was last at 92.48, down 0.6 percent from Monday’s close.

On Monday, the Institute for Supply Management (ISM) reported that its manufacturing index fell to 50.8 percent in April from 51.8 percent in the prior month, and below forecast of 51.6.

It is a light day for data with mainly the US IBD/TIPP economic optimism and total vehicle sales due later today.

In commodities, the Brent crude spot price fell 2.8 percent to $46.02 per barrel, and the Texas light sweet crude spot price dipped 1.96 percent to $44.98 so far on Tuesday.

In equities, the Shanghai Composite is so far up 0.39 percent to 2,949.748 on Tuesday.

In other metals, the SHFE June aluminium contract rose 85 yuan to 12,790 yuan, while the SHFE zinc contract for June delivery decreased 85 yuan to 15,205 yuan on Tuesday.

The June lead contract slipped ten yuan to 13,220 yuan while the nickel contract for September delivery rose 320 yuan to 73,660 yuan. The September tin contract increased 330 yuan to 110,660 yuan.

On the London Metal Exchange, base metals were weaker during Asian trading hours on Tuesday on Select. Copper was last at $4,975.50 per tonne, down $74.50 from Friday’s close, with around 2,300 lots changing hands.

Aluminium slipped $11 to $1,668, and nickel decreased $50 to $9,395. Zinc dipped $12.50 to $1,926, and lead fell $20 to $1,785. Tin eased $105 to $17,115.



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