SHANGHAI, Jun. 13 (SMM) – Bearish sentiment dominated the market during the Chinese Dragon Boat Festival. The US May non-farm employment was slightly better than forecasts, but was not strong enough for the US Federal Reserve (Fed) to begin to taper off its bond-buying program. The US unemployment rate rose 7.6% in May, worrying investors. According to China Customs, China’s imports of unwrought copper and copper semis during January-May fell 24.7% YoY. The National Bureau of Statistics announced that China’s CPI rose 2.1% YoY in May, but PPI slid 2.9% YoY. The S&P revised the US sovereignty credit rating outlook from negative to stable, but investors were worried that the Fed may scale back QE3. This sent US stocks down for a third straight day and drove the US dollar index below 81, but failed to give support to commodity prices. As a result, LME copper tumbled to a low of USD 7,020/mt, and finally closed at USD 7,133/mt, down more than 1.6%.
The US May non-farm employment announced last Friday beat forecasts. Despite a slight rise in unemployment rate, the labor force participation rate improved for the first time since last October, suggesting mild recovery in the country’s labor market. However, this also fuelled fear that the Fed will wind down QE3 early, weighing down base metals. The S&P revised US sovereignty credit rating outlook from negative to stable on Monday, keeping investors even more worried about the Fed’s possible exit of monetary stimulus.
UK ILO unemployment fell 5,000 between February and April, better than the 15,000 growth in the previous quarter. Industrial production in the euro zone contracted 0.6% in April, but was still better than the 1.7% contraction in March and the 1.1% estimate, strengthening the euro.
China’s exports, industrial value-added and power consumption in May all grew at a slower pace, sparking concerns over metal demand in the world’s second largest economy. This triggered technical selling, dragging base metals down. The Bank of Japan (BOJ) decided to keep easing monetary policy in place, disappointing investors. Japan’s core machinery orders in April missed forecasts. On the other hand, Australia’s Consumer Sentiment Index grew 4.7% in June, compared with a 7.0% decline in May, lending some support to base metals.
The US dollar index lost 0.14%, a fresh low since February; US stocks markets closed with losses. The euro against the US dollar recorded a 3-day winning streak. LME base metals fell across the board.
LME copper is expected to move within USD 7,000-7,150/mt during the Asian trading session on Thursday, with resistance at the 5-day moving average. The Shanghai Composite Index will fall back, while SHFE 1310 copper contract will fluctuate in the range of RMB 50,500-51,500/mt after opening lower. In spot market, falling SHFE copper will create opportunities for arbitrage. Spot discount of RMB 0-20/mt and premium of RMB 0-120/mt are expected over SHFE 1306 copper contract prices.