SHANGHAI, May 2 (SMM) – During the May Day holiday period, LME copper prices hovered narrowly between USD 8,400-8,450/mt after advancing above all moving averages. The US announced last Friday that its GDP grew by 2.2% for 1Q, weaker than market expectations and the previous reading as well, heightening market speculation on QE3 implementations again. The US dollar thus fell below 79 to close at 78.71 last Friday, which sent LME copper prices to the highest since April 5th before finally ending 1.12% higher at USD 8,426/mt. As the Standard & Poor's cut 11 Spanish banks Monday, risk aversion grew and caused the US dollar to climb to 78.96. The US economic figures were mixed, with the Chicago Purchasing Managers' Index (PMI) standing at 56.2, above the boom-or-bust level, while the consumption expenditure data was weak. Besides, China's large copper smelters and traders said they would step up efforts to ship the red metal to LME warehouses, easing market worries over global tight supplies. As a result, LME copper prices surged to USD 8,497/mt and finally settled at USD 8,402/mt Monday. According to the China Federation of Logistics & Purchasing (CFLP) Tuesday, China's PMI rose to 53.3 in April, the highest since earlier this year. Furthermore, the US ISM manufacturing PMI came in at 54.8, the highest level in the past 10 months. Market confidence was boosted and helped LME copper prices lurch narrowly before closing 0.35% higher at USD 8,432/mt Tuesday. In other news, spot copper premiums in London remained high at USD 115/mt Tuesday, which will continue to support copper prices over the near term.
LME copper prices have gained strong support at the 60-day moving average on stable US economy, and will likely trend higher between USD 8,380-8,500/mt during Wednesday's Asian trading session. The Shanghai Composite Index is likely to rally following a test at 2,400 several times last week. SHFE 1208 copper contract therefore will move above the 5-day moving average, with prices expected between RMB 59,000-60,000/mt. Spot copper discounts are estimated between negative RMB 100-50/mt versus SHFE 1205 copper contract.