Domestic and overseas macro news bolstered copper prices last week

The People’s Bank of China cut medium-term lending facility (MLF) rate again last week, with the one-year MLF rate adjusted to 3.45% and five-year and above MLF rate to 4.2%. The domestic economy needs liquidity to ensure a steady recovery, and the market's confidence has been boosted. On top of that, the official media China Real Estate Newspaper recently called for lowering down payment, lowering taxes and fees, and lowering housing prices. It especially emphasised that developers should be given greater autonomy in pricing, and be allowed to quickly withdraw funds through price reductions and promotions in order to maintain normal operation. Market's confidence for real estate also improved. Overseas, the Markit’s manufacturing and services PMIs for the US in August released last week were sluggish. The US job market may not be as strong as the Fed imagined. These pointed to the US economy gradual cooling. The market believes that the probability of the Fed pausing interest rate hike by 25 basis points in September is 88.5%.

In the eurozone, the manufacturing and service PMIs also continued to slump in August. Germany, the largest economy in Europe, performed the worst and may fall into a deep recession. The market concerns about the eurozone economy grew, and the euro dropped. Fundamentally, downstream purchases were suppressed by higher copper prices. On the other hand, social copper stocks were still at a historically low level, supporting copper prices.

On the whole, domestic macroeconomic benefits and a weaker US dollar index helped copper prices rise further last week. The domestic economy is still recovering slowly. China’s official PMI for August will be released this week. In addition, Powell's speech at the Fed's Jackson Hole Conference will be a focus of markets, which is expected to be a hawkish. And the US dollar index is expected to rebound. The most active SHFE copper contract prices are expected to move between 67,500-69,000/mt this week, and LME copper will trade between $8,250-8,450/mt. In China’s domestic spot market, there can be a growth in imports despite severer import losses. Spot premiums will be weighed on and stand between 250-400 yuan/mt this week.