Singapore 01/07/2016 - Copper on the Shanghai Futures Exchange fell during Asian trading hours on Friday amid disappointing Chinese manufacturing purchasing managers’ indexes (PMI) released in the day.
The most active SHFE September copper contract fell 70 yuan to 37,460 yuan per tonne on Friday, with around 210,000 lots changing hands so far. Open interest was at about 251,000 positions, up from 248,882 positions at Thursday’s close.
The Caixin Chinese manufacturing PMI for June read 48.6, which was below forecast of 49.1 and May’s number of 49.2. It was the index’s third monthly decline in a row and marked the steepest deterioration in manufacturing conditions since February. This was the 16th straight month where the index was below the neutral 50 value.
Chinese manufacturers reported the sharpest deterioration in operating conditions for four months in June, with output falling at the quickest rate since February amid a further drop in new work, said Caixin Insight Group.
“Overall, economic conditions in the second quarter were considerably weaker than in the first quarter, which means there had been no easing of the downward pressure on growth,” said Zhong Zhengsheng, director of macroeconomic analysts at Caixin.
“Against a backdrop of turbulent external environment, and in order to avert a sharp economic decline, the government must strengthem its proactive fiscal policy while continuing to follow prudent monetary policy,” he said.
Earlier in the day, China’s official manufacturing PMI for June came in at the borderline mark of 50, in line with expectations and down slightly from May’s reading of 50.1. The 50-point level separates expansion in activity from contraction.
The country’s non-manufacturing PMI for May was at 53.7, up from May’s figure of 53.7.
The official PMI is more focused on large state-owned firms, while the independently surveyed Caixin PMI is closely watched for conditions among the country’s private sector.
Chinese economic data saw a largely credit-fuelled bounce in the first quarter. The subsequent slowdown in most of China's key economic data since April hinted of a slowdown in Beijing's aggressive stimulus measures, while raising concerns that China's economic recovery was weaker-than-expected.
Meanwhile markets appear to have largely set aside concerns and uncertainty surrounding the United Kingdom’s vote to leave the European Union as base metals on the London Metal Exchange rose to multi-month highs on Thursday.
“Rather than sink in response to potential worsening of global activity and a costlier dollar exchange rate, industrial commodity prices were surprisingly resilient,” said John Lonski, chief economist at Moody’ Capital Markets Research in a report on Thursday. “The rebound by base metals prices were rendered all the more impressive by the firming of the dollar exchange rate.”
On Thursday, Bank of England (BOE) governor Mark Carney said that the bank could lower interest rates to stabilise the economy following the Brexit referendum in the UK.
"It now seems plausible that uncertainty could remain elevated for some time,” Carney said. "The economic outlook has deteriorated and some monetary policy easing will likely be needed over the summer."
After falling by more than one percent on Thursday after the BOE press conference, the British pound recovered by 0.19 percent to 1.3341 against the dollar recently on Friday.
The US dollar is down 0.09 percent to 95.86 so far on Friday.
In US data released Thursday, US weekly jobless claims were much as expected at 268,000, while the Chicago PMI for June was 56.8, well above a forecast 50.6.
Key US data due later on Friday includes final manufacturing PMI, ISM manufacturing PMI, consutrction spending and ISM manufacturing prices.
In equities, the Shanghai Composite is up 0.49 percent to 2,944.05 so far on Friday.
In other metals, the SHFE August aluminium contract rose 155 yuan to 12,685 yuan, and the SHFE zinc for September delivery increased 15 yuan to 16,465 yuan recently on Friday.
The SHFE August lead contract fell ten yuan to 13,165 yuan, while the September nickel contract gained 320 yuan to 75,210 yuan so far. September tin jumped 2,310 yuan to 114,080 yuan.
On the LME, base metals were mixed during Asian trading hours on Friday. Copper was down $3.50 to $4,841.50 per tonne, with around 1,000 lots changing hands.
Zinc hit a 12.5-month high of $2,119 earlier in the day and was last at $2,117, up $12.50 from Thursday’s close. Aluminium slipped $2 to $1,647, while nickel rose $60 to $9,505. Lead decreased $6.50 to $1,781.50, while tin was up $50 to $17,100.
(Additional reporting by Dalton Barker)