SHANGHAI, Jun. 1 (SMM) – On Thursday, as the latest Greek polls showed very similar support levels for the Conservative Party and Left-wing Party, market worries over a Greek exit from the euro zone continued unabated. Meanwhile, the Spanish government disclosed that recapitalization of its biggest state bank Bankia had ignited market concerns over the Spanish banking sector. The fragile European growth outlook linked to its escalating debt crisis and political upheaval sent the euro down to a 23-month low. Besides, the US later announced initial jobless claims rose for a fourth consecutive week last week, and that the final annual growth rate of GDP for 1Q was significantly lower than expected. The Chicago PMI was also reported to fall unexpectedly in May, an indication of slowing economic activity in the US Midwest as new orders slid to the lowest since September 2009. US equity markets closed with losses in response to these negative figures. Furthermore, the US dollar index climbed again above the 83 mark as investors sold risky assets owing to uncertainties in China's manufacturing PMI data for May as well as the latest US nonfarm payroll report on Friday. In consequence, LME copper sank to USD 7,403/mt, its lowest level so far this year. At the tail of trading, the Wall Street Journal reported the European department of the International Monetary Fund (IMF) has started discussing contingency plans for a rescue loan to Spain, which helped ease the pace of declining in commodities. LME copper thus pared some of the daily losses before finally ending at USD 7,437/mt, a slight drop of USD 71/mt. Turning to copper related markets, the Dow Jones Industrial Average has slumped by 6.2% since early May, the first monthly drop in the past eight months, while the Nasdaq Composite Index has slid by roughly 7.2%, the largest monthly drop since May 2010. The European stock markets retreated by around 7% in May, registering the poorest monthly performance in the past eight months. Crude oil prices dived by 21% to USD 86.53/bbl in May, hitting the largest monthly drop since December 2008, while gold prices declined by 16%. Dampened by a set of unfavorable factors, the financial market is turbulent and will likely weigh LME copper down over the near term.
Market focus has shifted to China's PMI data jointly released by the NBS and China Federation of Logistics & Purchasing, and markets expect this data to fall further, which will greatly restrict copper price movements. Coupled with the fact investors are cautious towards this evening's US nonfarm payroll report, LME copper will move weekly between USD 7,400-7,500/mt during Friday's Asian trading session. The Shanghai Composite Index will continue to come under pressure at the 60-day moving average. SHFE copper will march slightly down during the day, while SHFE 1209 copper contract will hover in the RMB 53,900-54,500/mt range. Spot copper premiums will inch up to positive RMB 200-280/mt versus SHFE 1206 copper contract.