METALS: Copper - Consolidates Gains Above $500, Looking To Push Higher

China equity markets have opened up weaker amid renewed US-China trade tensions, but we sit up from early lows. Some higher beta/tech sensitive markets are challenging their respective 20-day EMA support points. This follows though a very strong run higher in recent months. Onshore media continued to express confidence in the outlook. Via BBG: "There’s no need to be “overly pessimistic” about China’s A-share market as its medium-term momentum remains intact despite external shocks, Shanghai Securities News reported Monday, citing brokerages." 

• Weakness today builds on losses from Friday, which came prior to the latest Trump tariff threat. Sentiment was weighed then by concerns around export controls in the tech sector, along with valuation concerns.
• Losses in the CSI 300 were close to 3% at one stage but have since been pared (now back closer to 1.35%). We dipped below the 20-day EMA but have since recovered (see the chart below). For higher beta plays, like the Chinext, we are still under the equivalent support point. This index is still down around 2% at this stage.
• The language used by US officials (including US President Trump) suggests scope to negotiate ahead of the Nov 1 deadline for new tariff rates to come into effect. An off-ramp to the 100% tariff threat will be eyed, while Trump's threat on export controls on critical software could also impact China tech related sentiment. 

Fig 1: CSI 300 Supported Under 20-day EMA Support Point

Source: Bloomberg Finance L.P./MNI 

Yicai News Agency’s Chief Economist Confidence Index registered 50.3 points in October, down from 50.6 in September but remaining above the 50 point expansion threshold for the third consecutive month. Economists forecasted third-quarter GDP growth at 4.8% year-on-year, with expectations of a similar pace in the fourth quarter. For the full year, the average GDP growth projection remained at 4.8%. Regarding upcoming September economic data, participants projected CPI growth at -0.2% year-on-year, PPI at -2.3%, fixed asset investment growth at 0.0%, retail sales of consumer goods up 3.1% and industrial value-added up 5.1%. Analysts agreed that the probability of adjustments to the Loan Prime Rate (LPR) or the reserve requirement ratio (RRR) in October remained low, suggesting a steady monetary policy stance in the near term.

China’s recent trade measures concerning certain rare earth products does not constitute an export ban and applications that meet the relevant requirements will be approved, a spokesperson for the Ministry of Commerce stated. According to the spokesperson, China notified all relevant countries through its bilateral export control dialogue mechanism prior to the announcement. The spokesperson further noted the potential impact of the measures on global supply chains would be minimal.