BASE METALS: Shanghai Metals Gain; Sentiment Positive

Posted by tjdetai on July 9th, 2015

Base metals on the Shanghai Futures Exchange were modestly higher Thursday, with investors continuing to turn to riskier assets like metals in the absence of fresh negative news.

The benchmark June copper contract settled 0.8% higher at CNY71,750 a metric ton.

Overnight gains in global metals markets due to weakness in the dollar against the euro and strong economic data out of Europe and the U.S. provided a strong boost for SHFE metals, where copper stayed in a tight range but firmly in positive territory.

"Despite the [Chinese central bank interest] rate hike over the holiday, sentiment seems pretty good these days, so copper should be able to hold onto its uptrend over the next few sessions," said Shanghai Cifco Futures analyst Fang Junfeng.

Dip-buying at CNY70,000/ton also continued to contribute to the red metal's gains, analysts said.

However, the dollar's rebound against the euro in Asian trading, after investors betting on a European Central Bank rate hike started to take profits ahead of the central bank's decision, pressured dollar-denominated metals on the London Metal Exchange, and capped gains on the SHFE.

Around 0738 GMT, the euro was at .4282, down from .4331 in New York late Wednesday.

Analysts said copper should hold up well with the euro strengthening against the dollar, however, if the ECB raises interest rates later in the global day and indicates there are more rate hikes to come, as the market expects.

Large quantities of copper in bonded warehouses in China remain mostly tied up by financing arrangements. New restrictions on foreign-exchange transactions related to imports and exports are likely to inhibit new inflows of copper for financing purposes, but the discount in Shanghai prices to London prices after taxes and fees is still too large to allow much of the metal to be sold into the local market, analysts said.

Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY71,850-CNY71,950/ton, up from CNY71,250-CNY71,350/ton Wednesday.

Three-month London Metal Exchange copper ended Wednesday's afternoon kerb up 1 at ,600/ton.

It was quoted 0.1% lower at ,590/ton around 0700 GMT, when the SHFE closed.

SHFE aluminum settled 0.2% higher, lead closed 0.3% higher, and zinc was up 0.5%.

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