SHANGHAI, Jul. 3 (SMM) – A spate of disappointing global macroeconomic figures Monday reignited market worries over copper demand, as investor euphoria over last week's EU summit deal abated. Besides, declines in factory activity both in China and Japan deepened since sluggish orders from abroad dragged manufacturing activity there to a seven-month low, which raised investor worries that the health of the global economy is deteriorating. It was also reported that manufacturing activity in the euro zone hit the lowest since June 2009, and jobs were cut at the fastest rate in two and a half years, with May's unemployment rate surging to the highest record of 11.1%. The US PMI index dropped below the 50 mark in June for the first time in three years, and contracted surprisingly for the first time since July 2009, while the ISM manufacturing PMI also dipped to 49.7 in the same month. In addition, Finland said it will prevent the ESM from directly buying government bonds and therefore depressed market optimism towards implementations of earlier EU summit's positive measures. Against these backdrops, US equity markets closed down, and crude oil prices retreated by 1.4%. LME copper suffered limited selling pressures as investors kept cautious ahead of the Independence Day holiday Wednesday, but softened in line with a weak euro, fluctuating feebly during Monday's US and European markets and finally settling at USD 7,632/mt, a drop of nearly 1%.
Details on the EU summit's measures are unavailable, and Finland and Holland are against using the ESM to buy government bonds in the secondary market. Moreover, the unemployment rate in the euro zone increased significantly Monday and triggered growing market concerns. Nonetheless, the sliding Italian and Spanish borrowing costs should alleviate some investors' worries, which will keep the euro lurching Tuesday and exert limited impacts on copper price trends. As such, SMM anticipates that LME copper will hover narrowly between USD 7,580-7,640/mt during Tuesday's Asian trading hours. The Shanghai Composite Index will continue to move above 2,200. SHFE copper prices will start flat and then fluctuate narrowly, while SHFE 1210 copper contract will fluctuate in the RMB 55,200-55,600/mt range. Spot copper offers are estimated between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt versus SHFE current-month copper contract.