SMM Copper Market Morning Review (2013-6-7)

SHANGHAI, Jun. 7 (SMM) – Investors are cautious ahead of the announcement of US non-farm payrolls. The US dollar against the yen plunged, with the US dollar index down to near 81. US shares, in contrast, closed 0.5% higher. The European Central Bank (ECB) announced it will keep interest rate unchanged. ECB President Mario Draghi predicted a 0.6% contraction in GDP in the euro zone in 2013. European stocks closed 1.2% lower in response to his remarks. LME copper failed to gain upward momentum and tested support at USD 7,300/mt. Finally, LME copper ended USD 112/mt lower at USD 7,330/mt. Investors should not be too bearish over copper prices, though the US dollar index may rebound in the short term.

The number of US initial jobless claims last week was 346,000, higher than the forecast of 345,000, with the weekly average of 348,000 in May, higher than 343,000 in April. The number of May US Challenger layoffs was 36,398, higher than the previous month. The number of US ADP employment in May released Wednesday was also below expectations. The sluggish data triggered market concerns of US non-farm employment data to be released today, pushing down the US dollar index and commodity prices.

Bank of UK announced it will maintain interest rate at 0.50% and quantitative easing at GBP 375 billion, in line with market expectations. European Central Bank decided to maintain its rate unchanged in June, also meeting market expectations. But Draghi gave no hint of further easing, so the central bank will unlikely implement negative interest rate in the near term. European central bank lowered its economic growth forecast in 2013 from a 0.5% decline to a shrink of 0.6% due to economic concerns, pushing down European stocks markets and dragging down base metals market confidence.

The US dollar index plunged by 1.25%, to 81, the lowest since late February; US stocks markets closed with gains, with the euro against the US dollar up 1.19%, touching 1.3303, a new high since late February; European stocks markets closed with declines, and Asia-Pacific stocks markets all dropped.

LME copper is expected stop falling and move within USD 7,300-7,380/mt during the Asian trading session on Friday. SHFE 1310 copper contract will drift higher after a low opening as investors will close positions on the last trading day before the three-day holiday, with prices between RMB 52,500-53,300/mt. In spot market, downstream producers will purchase as needed at low prices ahead of upcoming holiday. Holders of imported copper will be in a hurry to sell to generate cash. Spot discount of RMB 0-50/mt and premium of RMB 0-100/mt are expected over SHFE 1306 copper contract prices.