SHANGHAI, May. 3 (SMM) – HSBC announced Wednesday that the final PMI reading for April was 49.3, below the 50 mark for the sixth consecutive month, which implied manufacturing activity at small and middle Chinese enterprises were still in contraction. The euro zone's final manufacturing PMI was reported to remain weak at 45.9, while PMI data in Germany, Italy, and France also came in below the boom-or-bust level, heightening market worries that major countries in this region like Germany and France would be dragged down by the European debt crisis. In the evening, the US announced ADP nonfarm payrolls added 119,000 in April, well below market anticipations of 175,000, and also down significantly from the previous 209,000, while factory orders for March slid by 1.5%, the biggest drop since 2009. Investors thus became more pessimistic about the US economic prospects along with growing risk aversion, which sent the US dollar up to an intraday high of 79.32. As a result, LME copper prices retreated below the 5- and 60-day moving averages, and tended to lose support at the 30-day moving average before finally ending at USD 8,305.5/mt, a loss of 1.5%. It was worth noting that spot copper premiums in London plumped to USD 65/mt Wednesday, meaning that tight supply eased some.
Employment figures out of the US and Europe are weak, while the US dollar has rebounded noticeably, dampening market investments. Crude oil and base metals have declined, with LME copper reporting the largest losses. As such, SMM anticipates LME copper will slide further during Thursday's Asian trading session, with prices expected between USD 8,250 - 8,350/mt. Chinese stock markets will fluctuate at the highs, which will cap downside room for SHFE copper prices. However, due to great upside resistance, SHFE copper prices will hover in the RMB 58,200-58,800/mt band. Spot copper discounts are estimated to narrow to negative RMB 80-0/mt versus SHFE 1205 copper contract.