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LME, ShFE Metals Dip Taking Cues From Dull Equities; China Virus Sparks Concern

21 Jan 2020 10:52 am
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Mumbai (Commodities Control) – Industrial metals fell on Tuesday, pulled lower as negative sentiment spilled over from stock markets after person-to-person transmission of a new virus was confirmed in China, and following a rating downgrade for Hong Kong.

Three-month nickel on the London Metal Exchange (LME) dropped 2.1% to $13,720 a tonne by 0249 GMT, while the most-traded nickel contracts on the Shanghai Futures Exchange (ShFE) fell 0.9% to 107,300 yuan ($15,565.61) a tonne.

LME copper tumbled 1.4% to $1,671.50 a tonne and zinc lost 1.6% to $2,405.50 a tonne. ShFE copper declined 1.4% to 48,420 yuan a tonne while zinc decreased 1.1% to 18,180 yuan a tonne.

Four people have died and more than 200 people have been confirmed as suffering from a new coronavirus that broke out in the central Chinese city of Wuhan and has spread to South Korea, Thailand and Japan.

"Hong Kong was downgraded, plus the Wuhan virus. People are selling off risk assets," said a base metals trader, similar to market reactions during the earlier Severe Acute Respiratory Syndrome (SARS) outbreak.

The new virus causes a type of pneumonia and belongs to the same family of coronaviruses as SARS, which killed nearly 800 people globally over 2002-2003.

Meanwhile, Moody's downgraded Hong Kong's credit rating one notch to "Aa3" from "Aa2" on Monday, saying its view on the strength in the Chinese-ruled city's institutions and governance is "lower than previously estimated."

China is also gearing down for its week-long Lunar New Year holiday starting on Jan. 24 and many traders are closing their positions before taking time off.

Prices will be weak before the Spring Festival, as the holiday is also known, as demand usually decreases, said an analyst, also saying the sell-off was related to the virus.

China's refined copper output rose 11.6% year-on-year in December to a monthly record high of 930,000 tonnes. Output of lead, zinc hit record high hit record highs as well.

(Commodities Control Bureau)

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