Major domestic fiscal and monetary policy boosts copper futures surge during the week

Macro economy, US manufacturing contracted for the third consecutive month, hitting a 15-month low. Although the composite PMI remained in the expansion territory, overall economic growth showed a slowing trend. Within the US Fed, there were some differences in judgment regarding the future path of interest rate cuts. According to the CME FedWatch tool, traders' bets on the next rate cut of 25/50BP were both close to 50%. In China, after the US rate cut, the space for monetary policy easing expanded. This week, the PBOC announced major benefits, lowering the mortgage rate on existing home loans on top of recent RRR cuts and interest rate cuts, stabilizing household leverage while alleviating weak consumption pressure. Additionally, through interest rate marketization and new monetary policy tools, the government and financial leverage structure was optimized. Furthermore, the Central Committee of the Communist Party of China also released positive signals on fiscal policy this week. As a result, the Shanghai Composite Index surged back to the 3,000-point mark. Copper futures were driven upward by macro sentiment throughout the week. LME copper soared from $9,381.5/mt, briefly breaking through the $10,000/mt mark by the week's end; SHFE copper surged from 75,130 yuan/mt, breaking above 79,000 yuan/mt.

Fundamentals, this week the tight supply and demand for spot copper concentrate temporarily eased, with the CSPT setting the fourth-quarter spot copper concentrate purchase guidance price at $35/mt and 3.5 cents/lb, and spot TC slightly rebounded. Due to the sharp rise in copper prices, the import window for arrivals in early to mid-October closed, with overseas importers focusing more on the post-holiday period, leading to a quiet imported copper market in the Shanghai bonded zone. In domestic trade, National Day stocking demand continued to drive domestic destocking, but the surge in copper prices hindered new demand, causing spot premiums to jump initially and then pull back. Looking ahead to next week, the US September unemployment rate and non-farm payrolls will provide more guidance for the future path of rate cuts during the election period. Domestically, short-term favourable macro front still awaits time to unfold, and entering the peak season, China's September manufacturing PMI is expected to rebound, providing stronger support for the bottom of copper futures. LME copper is expected to operate in the $9,800-10,200/mt range, and SHFE copper in the 76,500-80,000 yuan/mt range. In the spot market, a large influx of imported copper into domestic trade is expected during the holiday, leading to a certain degree of inventory buildup in domestic social inventory. Under high copper prices, reduced new orders downstream will pose a challenge to subsequent destocking, with spot prices likely to trade at discounts against the SHFE copper 2410 contract before delivery. Spot premiums against the 2410 contract are expected to range from negative 100 yuan/mt to zero.