China's Supportive Measures and Metals Market Outlook

Metals – Supportive measures from China

China announced some measures on Monday to support the economy and financial markets. Beijing has reduced the stamp duty on stock trading by 50% (from 0.1% to 0.05%), with the Chinese Securities Regulatory Commission also approving new retail funds to increase capital inflow and tightening IPO regulations to boost confidence among investors.

Meanwhile, the National Development and Reforms Commission also pledged to increase private investments in the construction of national and key infrastructure projects including transportation, advanced manufacturing, and modern agriculture facilities among others. In addition, China announced some measures to support the flailing property sector. These measures have helped broader sentiment in financial markets. This is likely to see LME metals opening stronger today, with yesterday a bank holiday in the UK.

Spot gold has managed to edge higher in recent days with the market reacting to hints from Jackson Hole that the Federal Reserve will likely keep rates unchanged at its September FOMC meeting. However, we could see some renewed pressure later in the year, with the market still coming around to the idea that the Fed may have to hike rates at least one more time later in the year. This continues to support the US dollar and treasury yields. However, we will need to keep a close eye on US data releases in the coming weeks, which could shed more light on what the Fed may do. This starts with the US jobs report on Friday.

Despite strength in recent days, gold ETFs have seen 13 consecutive weeks of outflows. In addition, CFTC data show that over the last reporting week, speculators cut their net long in COMEX gold by 20,845 lots over the week to 25,695 lots, the lowest levels since March.