The bond market moves ahead of the rate cut, spreading expectations of economic cooling in the US and Europe, how will copper prices move next week

In terms of the macro economy, the August US CPI annual rate saw a significant decline from the previous value, increasing market expectations of an economic slowdown. Economic data, especially manufacturing data, continued to drag, causing the overall yield of US Treasuries to fall during the week. The yield of the 10-year US Treasury once fell to 3.60, hitting a new low since June 2023. In Europe, affected by the continuous downturn in the German economy, the ECB cut the benchmark interest rate by 25BP and the main refinancing rate by 60BP in September. Although the ECB maintained its stance of high inflation in 2024, the narrowing of the interest rate corridor indicates signs of economic pressure. In China, the August CPI rebounded slightly from the previous value. However, pessimistic expectations for Q3 GDP growth made it difficult to implement policies aimed at reducing leverage and deflating bubbles. This week the macro sentiment was rather quiet, with copper prices rising slightly before the US Fed cut interest rates. At the beginning of the week, LME copper hovered around $9,000-9,100/mt and rose to $9,250/mt by the end of the week. SHFE copper fluctuated between 72,000-73,000 yuan/mt at the beginning of the week and surged briefly above 74,000 yuan/mt by the end of the week.
On the fundamentals, the tightness in copper concentrate continued to spread, and the spot transaction focus declined again. Before the Mid-Autumn Festival, the social inventory of domestic copper cathode decreased significantly. Although the large volume of imported copper arrivals and the shift of SHFE copper to a backwardation structure hindered the rise of spot premiums, strong downstream buying provided strong support. Due to the resistance in implementing the Fair Competition Review Regulations, some regions reported that the government might slow down its rollout. Looking ahead to next week, the US Fed's September FOMC meeting is approaching, and the Bank of Japan will also hold a policy meeting. If the international interest rate differential further narrows, it may trigger asset reallocation in the capital market. It is expected that LME copper will fluctuate between $9,150-9,350/mt, and SHFE copper will run between 73,000-75,000 yuan/mt. For the spot market, after the Mid-Autumn Festival, the delivery of the SHFE 2409 contract will coincide, and under the support of inventory reduction, spot premiums over the 2410 contract are expected to range between 50-120 yuan/mt.