(MB) Base metals prices on the Shanghai Futures Exchange were all down during morning trading on Tuesday March 5, with renewed strength in the US dollar and soft Chinese economic data denting investors’ appetite for risk. Disappointing economic data from China early on Tuesday renewed concerns among market participants regarding a slowdown in global economic growth, prompting a more cautious approach to trading. China’s Caixin services purchasing managers’ index (PMI) eased to a four-month low of 51.1 in February, falling short of the expected 53.5 and the previous 53.6. A reading above 50 signals industry expansion, while below that level indicates contraction. Adding further downward pressure to the base metals market was a firmer US dollar; the dollar index stood at 96.69 as at 10.15am Shanghai time on Tuesday, up from 96.41 at a similar time on Monday and last Friday’s low of 96.06.
The most-traded May aluminium contract on the SHFE stood at 13,565 yuan ($2,023) per tonne as at 10.15am Shanghai time, down by 170 yuan per tonne or 1.2% from Monday’s close of 13,735 yuan per tonne.
The weakness in SHFE aluminium prices follows a similarly weak performance by the three-month price on the London Metal Exchange, which plunged by more than 2% at the close of trading on Monday.
“Optimism that a China-US trade deal is near has failed to offset the continued evidence of slowing global growth momentum, which is negative for the broader fundamentals [of the aluminium market],” Fastmarkets analyst James Moore said.
In wider market news, China’s Premier Li Keqiang announced plans on Tuesday to cut the value-added tax (VAT) rate that covers the manufacturing sector to 13% from 16% as part of efforts to support the country’s slowing economy.
Speaking at the opening session of the National People’s Congress in Beijing, Li also announced that the Chinese government is targeting economic growth of 6-6.5% in 2019 – less than the 6.6% gross domestic product growth reported last year.
