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SMM Copper Market Morning Review (2013-6-14)
Jun 14,2013 09:42CST
price review forecast
The slump in Asian stock markets yesterday increased worries over demand in China.

SHANGHAI, Jun. 14 (SMM) – The slump in Asian stock markets yesterday increased worries over demand in China. The World Bank lowered its forecast for global economic growth on Wednesday, down from January’s projection of 2.4%. The US retail sales and employment data released later topped forecasts, pushing US shares up, with the S&P up 1.48%. LME copper, however, failed to be lifted, testing support at USD 7,011/mt. Finally, LME copper ended at USD 7,062/mt, down over 1%, but still outperformed other base metals.   

US retail sales rose 0.6% MoM in May, a new 3-month high, while core retail sales also climbed 0.3%, both beating forecasts by economists. Initial jobless claims fell 12,000 to 334,000 last week, suggesting mild recovery in the US labor market. These figures signal mild growth in the US economy, but it is still uncertain whether the US economy is now strong enough for the US Federal Reserve (Fed) to bring QE3 to an end. In this context, investors sold the US dollar, sending the US dollar index and base metals down. Fed Chairman Bernanke will deliver a bi-annual testimony to the Congress early next week, which may offer some clues.

Italy auctioned EUR 3.415 billion of government bonds to be matured by 2016, with the average yield growing from May’s 1.92% to 2.38%. The country also auctioned EUR 1.698 billion worth of government bonds to be matured by 2018, with the average yield increasing to 2.61% from 2.44%. European shares mostly closed down, unfavorable for base metals.

Asian stocks generally suffered losses yesterday, with the Nikkei plummeting 6.4%, the lowest since April 4 when aggressive monetary stimulus was rolled out. Sayuri Shirai, member of the Policy Board of the Bank of Japan (BOJ) voiced worries over Abenomics. She believes Japan’s CPI will not grow in the fiscal year of 2014 and warns downward risks facing the Japanese economy. The BOJ decided Tuesday to keep monetary policy unchanged, disappointing some investors and was the major cause behind the slump in stock markets. The Shanghai Composite Index tumbled 2.83% to below 2,200 points and hit a new low since mid-December last year on the first trading day following the Chinese Dragon Boat Festival due to sell-off. This dampened sentiment in base metals markets.    

The US dollar index lost 0.36%, a fresh low since late February. US stocks markets closed with gains. The euro against the US dollar recorded a 4-day winning streak and hit a new high since late February. Asian stocks generally closed down. LME base metals ended in negative territory across the board.

Investors are eyeing Bernanke’s speech next week, which will send LME copper down to USD 7,020-7,120/mt during the Asian trading session on Friday. The Shanghai Composite Index will extend losses, while SHFE 1310 copper contract will fluctuate in the range of RMB 50,700-51,500/mt after opening lower. In spot market, falling SHFE copper will create opportunities for arbitrage. Spot copper supply will be ample, with spot premium expected at RMB 0-120/mt over SHFE 1306 copper contract prices. 

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