SMM Copper Market Morning Review (2013-6-3)

SHANGHAI, Jun. 3 (SMM) – US economic data released last Friday were mixed. The US Consumer Confidence Index in May hit the highest since July 2007, and Chicago PMI in May also hit a record high since March 2012. However, the US personal consumption expenditures (PCE) price index in April slipped 0.3% compared with March. Better-than-expected economic figures sparked worries that the US Federal Reserve may scale back QE3. As a result, investors turned away from US stocks to US dollar, sending US shares plunging while pushing the US dollar index up. Unemployment rate in the euro zone hit a new record high, causing European stocks to close 0.9% lower. Ivan Arriagada, acting CEO of Codelco, said the company’s copper output in the first quarter grew 3.2% YoY. Freeport McMoRan Copper Gold Inc.’s miners at Grasberg copper mine in Indonesia refused to return to work. Investors predicted last Friday that China’s May manufacturing PMI would fall. In this context, LME copper sank to a low of USD 7,245/mt before finally closing at USD 7,276/mt. China’s May manufacturing PMI, released June 1, was positive, and this will provide support to base metals this week.   

Visco, Governor of the Bank of Italy, said the European Central Bank (ECB) is ready to take further action according to market situation. Germany’s retail sales rose 1.8% in April, beating the 1.1% estimate. However, unemployment rate in the euro zone rose to a new record high of 12.2% in April. Worsening labor market raised expectations that the ECB will cut interest rates, sending the euro index below 1.3000.   

China’s official manufacturing PMI was 50.8 in May, higher than the 50 forecast and up 0.2 from April, pointing to expansion for eight consecutive months. This was in sharp contrast with HSBC’s flash May China manufacturing PMI, which tumbled to a seven-year low of 49.6. The difference was caused by different statistics methods and manufacturers surveyed. Upbeat China’s official manufacturing PMI did ease worries from downbeat HSBC’s flash May China manufacturing PMI. Final HSBC’s China May PMI and China’s official non-manufacturing PMI for May are due today.  
        
The US dollar index closed 0.33% higher. US stocks fell across the board, while Asian shares generally closed down. LME base metals were mixed. 

LME copper rose to the 60-day moving average after a high opening, and should advance further to USD 7,300-7,400/mt during the Asian trading session on Monday as China’s May manufacturing PMI beat forecasts and still stayed above 50. The Shanghai Composite Index will drift higher after a low opening, which will send SHFE 1309 copper contract up to RMB 52,500-53,300/mt after opening higher. In spot market, cargo holders will be eager to sell at highs against rising SHFE copper and inflows of imported copper. Spot premium is expected to narrow to RMB 80-220/mt over SHFE 1306 copper contract prices.