SHANGHAI, Jun. 27 (SMM) – Worries over economic growth and liquidity crunch in China continued to weigh on commodity prices. The downward revision of US 1Q GDP also undermined sentiment in base metal market. On the other hand, remarks from the head of major central banks are providing a source of comfort. President of the Bank of England said investors overreached to Fed Chairman Bernanke’s speech. ECB President Mario Draghi said in terms of monetary policy, price stability is assured, and the overall economic outlook still warrants an accommodative stance, the exit from which by the way is still distant since inflation is low and unemployment is high. Worse-than-expected US 1Q GDP makes investors guess as to whether the US Fed will keep QE3 in place, pushing US shares up, with the Dow Jones up over 1%. European stocks closed 1.7% higher. Gold prices, however, trimmed 3.6%. LME copper bounced back from lows, moving within USD 6,700-6,800/mt, and finally closed at USD 6,735/mt. LME copper positions continued to grow overnight, with total positions exceeding 300,000 lots, the highest since early March 2011. Judging from positions, LME copper may stage volatile movement in the future.
The US Commerce Department announced that the US final 1Q GDP grew a mere 1.8%, well below forecasts and the previous figure of 2.4%, due largely to downward revision in consumer spending, business investment and exports. Consumer spending was revised down from 3.4% growth to 2.6%, business investment was cut from 2.2% growth to 0.4%, and exports were revised from 0.8% growth to -1.1%. US stocks slid due to depressed data, but later recouped earlier losses on weakening expectations for QE3 exit.
The European Central Bank (ECB) is nowhere near exiting from its accommodative monetary policy, ECB President Mario Draghi said Tuesday. He expects monetary stimulus and improvement in financial markets to help the European economy recover later this year. His stance helped cheer investors up given the rumor of US QE3 exit and liquidity crunch in China.
The US dollar index continued to rise. LME base metals closed with losses, though rising during the European session.
LME copper will stop falling and move within USD 6,700-6,830/mt during the Asian trading session on Thursday. China’s A-shares will fall back, and SHFE 1310 copper contract will fluctuate between RMB 48,300-49,300/mt. In spot market, tepid demand at the month’s end will weigh down spot copper prices. Spot discount of RMB 0-100/mt is expected SHFE 1307 copper contract prices.