October 31, 2018 / 2:31 AM / 13 days ago

METALS-Shanghai aluminium hits 2-year low after downbeat China data

(Updates prices, adds details)

By Manolo Serapio Jr

MANILA, Oct 31 (Reuters) - Aluminium fell to its weakest in two years in Shanghai and hit a nearly 15-month low in London on Wednesday after China's manufacturing sector grew at its slowest pace since July 2016, dampening the demand outlook in the world's top metals consumer.

Other metals also pulled back, with nickel hitting multi-month lows and zinc and copper dropping to their lowest in weeks.

Amid rising headwinds from the Sino-U.S. trade war, China's official Purchasing Managers' Index dropped to 50.2 in October from 50.8 in September.

The latest reading suggests a further slowing in the world's second-biggest economy and could prompt more policy support from Beijing on top of a raft of recent initiatives.

The previous soft patch in China's economy in 2015-2016 "triggered a period of intense capital outflows from China, as markets anticipated policymakers to step up monetary easing, opening the path to (yuan) depreciation," Mizuho Bank said in a note.

"Given the sharp loss of growth momentum now, China could face a similar conundrum as in 2015-2016, although the magnitude of capital outflows has been far smaller in recent months," it said.

The most-traded December aluminium contract on the Shanghai Futures Exchange fell as far as 13,930 yuan ($1,999) a tonne, the lowest since October 2016, before settling at 13,960 yuan, down 1.1 percent.

Three-month aluminium on the London Metal Exchange eased 0.1 percent to $1,965 by 0719 GMT, after touching an almost 15-month trough of $1,961.

* TRADE WAR RISKS: British lender Standard Chartered warned an escalating Sino-U.S. trade war was weighing on business sentiment in its core emerging markets.

* CHINA'S YUAN: As China's yuan approaches the 7 to the dollar barrier, investors are betting authorities will eventually let the currency fall beyond the historic level. Yet they are just as confident that China won't allow the kind of capitulation seen in past market meltdowns.

* CHINA POLLUTION: Three cities in China's top steelmaking province of Hebei have issued second-level or 'orange' pollution alerts, forcing industrial plants to cut output.

* NICKEL: LME nickel was last down 0.4 percent at $11,715 per tonne, having initially touched a 10-month low of $11,675. In Shanghai, nickel closed down 0.9 percent at 97,760 yuan, after hitting a 6-1/2-month trough of 97,420 yuan.

* OTHER METALS: On the LME, copper was steady at $6,031 and zinc gained 0.3 percent to $2,557.50, after hitting a one-month low. In Shanghai, copper slid 1.6 percent to settle at 49,060 yuan and zinc eased 0.9 percent to 21,740 yuan, after both dropping to multi-week lows.

* EQUITIES, DOLLAR: Asian stocks clawed up from 20-month lows amid pledges by China to support its markets. The dollar climbed to a 16-month high versus a basket of its major rivals on stronger than expected U.S. economic data.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 6.9690 Chinese yuan)

Reporting by Manolo Serapio Jr. Editing by Joseph Radford and Sunil Nair

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