SMM Copper Market Morning Review (2013-4-19)

SHANGHAI, Apr. 19 (SMM) – Disappointing financial reports of EBay and UnitedHealth and discouraging Philadelphia Fed manufacturing for April caused the S&P 500 to retreat from the 50-day moving average and close 0.67% lower. On the other hand, US Fed officials claimed the Fed will keep low interest rate in place for another five or ten years, sending the US dollar index down. As such, gold prices gained 0.7%, while crude oil prices advanced 1.2%. LME copper returned to above USD 7,000/mt, and finally closed USD 30/mt higher at USD 7,075/mt. The struggle between shorts and longs will keep LME copper hovering around USD 7,000/mt until new signals emerge.

According to the US Labor Department, the country’s initial jobless claims rose for a fourth straight week to 352,000 last week, slightly higher than expectations. March non-farm payrolls were surprisingly sluggish. The US leading economic indicators for March was down 0.1%. The Philadelphia Fed manufacturing index dropped from 2.0 in March to 1.3 in April. In this context, most Fed officials argued that QE3 should continue to be maintained, sending the US dollar index down to 82.35. The US dollar index edged up to 82.60 at the tail of trading, though.

Germany's lower house of parliament voted overwhelmingly on Thursday to grant Cyprus a 10 billion euro bailout. Seven-year extensions of loans from the EFSM for Ireland and Portugal have been approved. Besides, Spanish banks’ non-performing loans dropped. These figures boosted market sentiment, helping risky currencies to hit highs. However, Italy's parliament failed to elect a new state president in the first two votes, causing risky currencies to surrender gains. 

The spot exchange rate of the RMB against the US dollar snapped a four-day winning streak due mainly to inflows of cross-border capital, Japan’s announcement of easing monetary policy and continuation of QE3 in the US. Investors are now holding to the sidelines while waiting for guidance from new policies. 

Officials attending the G20 meeting will likely give support to Bank of Japan’s aggressive easing monetary policy.

Possible sell-off at highs due to bearish sentiment will keep LME copper in check within USD 6,980-7,100/mt during the Asian trading hours on Friday. The Shanghai Composite Index will hover around 2,200 points, while SHFE 1308 copper contract will move in a RMB 50,500-51,500/mt range after a high opening. In spot markets, cargo holders will be eager to sell at high prices, while downstream producers will be wary of buying since they don’t believe the rebound in copper prices will sustain, with spot copper discounts expected between RMB 50-150/mt against SHFE 1305 copper contract.