SHANGHAI, Jun. 28 (SMM) – Short-term liquidity risks remain and China’s economic growth missed forecasts, causing the Shanghai Composite Index to close down for seven consecutive days and hit a 4-1/2-year low. The US revised down 1Q GDP growth, easing concerns that the US Federal Reserve will wind down monetary stimulus soon. Rebound in consumer spending in May and decline in initial jobless claims last week suggest the US economy is on track to modest growth. Several Fed officials’ remarks helped ease market worries, pushing US and European stocks up. Crude oil prices gained 1.6%. Gold prices, however, dived below USD 1,200/oz overnight due to market panic. LME copper remained weak during the European session as some investors closed positions ahead of mid-year liquidity crunch, and finally closed at USD 6,736/mt. Cancelled warrants of LME copper surged to 56.25%.
Initial jobless claims in the US in the week ending June 22 fell to 346,000. Personal income and spending in the US in May both grew more than expected, pushing the US dollar index above 83. However, William Dudley, President of the Federal Reserve Bank of New York and Dennis Lockhart, President of the Federal Reserve Bank of Atlanta said investors had overreacted to Fed Chairman Bernanke’s speech, claiming that the Fed will not taper off debt-buying program until US economy recovers as the FOMC expects and that there is still a long way to go before the Fed hikes interest rate. Their remarks helped appease market concerns, pushing the US dollar index and US 10-year government bond yields down while helping S&P’s 500 Index record the biggest three-day gain since January.
EU member reached consensus over rules for restructuring and liquidation of ailing banks on Thursday morning, which is designed to avoid government bankruptcy from banking crisis. The number of people out of work in Germany fell by some 12,000 on a seasonally adjusted basis in June, with the unemployment rate staying close to a post-reunification low at 6.8% following three consecutive months of growth. Economic Confidence Index in the euro zone climbed from 89.4 to 91.3 in June and Business Confidence Index also improved from -0.76 to -0.68.
In China, the stance of the People’s Bank of China (PBOC) over the past couple of days helped alleviate worries over liquidity crunch. The State Council is urging the transformation of shantytowns to promote economic development and improve people’s living standard. The State Administration of Foreign Exchange (SAFE) recently approved RMB 9.2 billion in RQFII and USD 900 million in QFII. A-shares fell at a slower pace.
European and US stocks generally closed up. LME base metals mostly closed with gains.
LME copper will move within USD 6,670-6,800/mt during the Asian trading session on Friday. China’s A-shares will extend declines, and SHFE 1310 copper contract will fluctuate between RMB 48,000-49,200/mt after a flat opening. In spot market, trading will be light, with spot discount of RMB 50-150/mt expected SHFE 1307 copper contract prices.