SHANGHAI, Apr. 23 (SMM) – Goldman Sachs lowered overnight its forecast for copper prices in 2013 from USD 8,453/mt to USD 7,600/mt. Worse-than-expected US March existing home sales and March Chicago Fed National Activity Index caused bearish sentiment to spread. That being said, massive buying was reported at near USD 6,800/mt due to a mild rebound in gold prices and optimism over China’s manufacturing PMI. LME copper regained some losses, and finally closed down USD 42/mt at USD 6,926/mt.
The re-election of Italian president Giorgio Napolitano is a sign that Italy’s political situation has stabilized and increased the likelihood of establishing a coalition government. In this context, the Italian and Spanish stocks closed up. Spain’s 10-year government bond yield fell to 4.5% for the first time since 2010.
The US existing home sales were an annualized 4.92 million units in March, up 10.3% YoY, but down 0.6% MoM and below the forecasted 5 million units. The existing houses in the country are now in supply shortfall. The decline in sales is due largely to limited inventories. These downbeat figures sent the US dollar index and US stocks down.
The Sichuan earthquake did not exert much influence on the Shanghai Composite Index, which edged down a mere 0.11% and recovered all the losses during the day at the tail of trading. This is mainly because the economic loess from the earthquake account for a meager 0.2% of China’s GDP. Besides, investors are expecting stimulus policies for the reconstruction of the disaster-hit areas. Newly-added funds outstanding for foreign exchange of Chinese financial institutions totaled RMB 236.3 billion in March, down from the record high of RMB 683.7 billion in January, but still up from the monthly average of RMB 40 billion last year, and marked four consecutive months of increase. This suggests that recovery of the Chinese economy and growing expectations of the RMB’s appreciation resulted in continuous capital flows into China.
Markets are eyeing HSBC’s China April PMI, which is due today. LME copper should fluctuate in a range of USD 6,800-6,950/mt during the Asian trading hours on Tuesday. The Shanghai Composite Index will rebound, while SHFE 1308 copper contract will move between RMB 48,800-50,000/mt after starting the day lower. In spot markets, spot copper prices will pull back to near RMB 50,000/mt. Some cargo holders will hold back goods at low prices, while others will be eager to sell for cash at the month’s end, with spot copper premiums expected between RMB 100-200/mt against SHFE 1305 copper contract.