Base metals prices on the Shanghai Futures Exchange were down during the morning trading session on Tuesday September 17, with risk aversion still heightened following an attack on Saudi Arabian oil facilities over the weekend.
“It was a textbook risk-off response in global financial markets following the strike on Saudi Arabia’s oil facilities over the weekend. Equities dipped, petro and safe-haven currencies benefited, and treasuries and precious metals lifted,” analysts with ANZ Research said in a morning note.
Acting as another broad headwind for the SHFE base metals complex was a firmer US currency ahead of the upcoming two-day US Federal Open Market Committee (FOMC) meeting that concludes on Wednesday.
The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was little changed from its close at 98.61 as at 10.21am Shanghai time. This compares with a reading of 98.13 at roughly a similar time on Monday, however.
Previously, the market had largely priced in an interest rate cut at FOMC’s September meeting. This week, with the sharp increase in oil prices, there has been growing speculation that the US central bank may not be in such a hurry to cut rates again, a Shanghai-based analyst said.
Therefore, with the different scenarios that tomorrow’s meeting might bring, the dollar has become rangebound, the analyst added.
This uncertainty has instilled further caution in markets this morning, with SHFE base metals prices declining across the board. Lead, giving the worst performance of its peers, had its most-traded October contract drop to 16,975 yuan ($2,401) per tonne as at 10.20am Shanghai time, down by 385 yuan per tonne – or 2.2% – from Monday’s close of 17,360 yuan per tonne.
At the same time, market participants continue to digest the disappointing Chinese data released early on Monday, which is acting as a further drag on prices this morning – see below.
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