SHANGHAI, Jun. 8 (SMM) –
Last week, LME copper prices initially surged before falling back. The closure at Freeport McMoRan Copper and Gold's Grasberg copper mine in Indonesia pushed LME copper prices up to USD 7,500/mt, but gains were dampened by mixed US economic data, especially disappointing US employment rate results. Euro zone data was also pessimistic, causing the US dollar index, as well as European and US stock markets, to fall. Differences between the HSBC and official PMI for China added to market uncertainty and dragged LME copper prices down to USD 7,350/mt.
The Shanghai Composite Index plummeted by nearly 4% last week, causing SHFE copper prices to meet resistance at the 60-day moving average, but still allowed the low end of the price range to rise to RMB 52,500/mt. As market sentiment weakened, trading volumes fell by 694,000 lots and total positions contracted by 8,198 lots as the shift was made to SHFE 1310 copper contracts and risk aversion sentiment began growing ahead of the Chinese holiday.
Copper prices are expected to fluctuate significantly in the coming week. The European Central Bank announced it would leave refinancing interest rates at a record low 0.50%, which was in line with market expectations. The ECB also left marginal lending rates unchanged at 1.00% and the deposit reserve ratio at 0.0%. The ECB president also pointed out that the bank lowered its forecasts for euro zone economic growth in 2013 since disappointing economic data over the past months increased beliefs the euro zone will not be able to come out of the current recession by the end of this year. Draghi also expressed the possibility of negative deposit interest rates, causing the euro to surge by 1.2% last Thursday and boosting base metals prices.
The US Labor Department reported that the number of initial jobless claims last week topped expectations, but US non-farm employment data remains unpredictable. The number of US initial jobless claims for the first week of May jumped to 360,000, its largest increase since November 2012, allowing the QE3 issue to continue to dominate markets. The US dollar index dipped to a four-month low, but has little room left to fall. Any gain in the index, however, will dampen copper price increases.
Gold and crude oil prices gained ground recently and helped boost copper prices. LME copper prices initially surged before falling back to moving averages, and with prices now expected to challenge USD 7,500/mt in the near future. However, due to the lack of Chinese investors during next week's holiday, copper prices will remain volatile. If LME copper prices gain upward momentum, SHFE copper prices will also challenge RMB 53,500/mt, but should still find solid support at RMB 52,500/mt if LME copper prices encounter resistance at the 60-day moving average. SHFE copper prices are expected to stabilize at RMB 52,800/mt.