SHANGHAI, Jul. 1 (SMM) – Asian stocks were pushed higher last Friday by encouraging Japanese economic data and signs that the US Federal Reserve (Fed) will keep in place its monetary stimulus for the moment, which helped improve market sentiment during the European session. Commodity prices gained support from the People’s Bank of China (PBOC)’s efforts to ease liquidity crunch in China’s banking system. US shares were mixed, however, as investor attention was shifted to China’s June manufacturing PMI due to the released on Monday. The US dollar index extended gains as it was reported that the Fed may begin to taper off debt-buying program in September, stalling any substantial uptick in copper prices. LME copper hit a high of USD 6,828/mt before finally closing at USD 6,765/mt. The proportion of cancelled warrants is still on the rise and dip-buying has been reported, so investors shouldn’t be overly bearish over copper prices.
Fed official Jeremy Stein stated overnight that whether the Fed will quit QE3 will depend on long-term economic progress, rather than near-term economic data, but hinted the Fed will begin to take action in September at the earliest if US economy maintains mild recovery, causing expectations over QE end to grow. In this context, the US dollar index broke through 83, weighing down stocks and base metals prices. But as University of Michigan's June CCI for US hit a record high of 81.4 since July 2007, financial markets were boosted.
After the EU summit ended, the Fitch and Standard & Poor's downgraded Cyprus' credit rating to show negative effects of debt transposition and write-down by the country. But the two rating agencies pointed out that since the country's bond transposition plan underway has not caused substantial effects on the market, its rating will be raised once the bond transposition plan is completed.
China Banking Regulatory Commission President Shang Fulin said at the Lujiazui Forum that the banking sector has been subject to liquidity tightness recently, but the sector actually did not fall short of liquidity. Since liquidity tightness has eased, domestic banking sector will continue to move steadily. But the industry should enhance risk management, structure adjustment and business transformation.
European and US stocks markets dropped except for the Nasdaq Composite Index; LME base metals prices generally rose.
China’s June manufacturing PMI is eyed today. LME copper will encounter growing resistance at the upper side after regaining the 5-day moving average, with prices expected between USD 6,750-6,830/mt during the Asian trading session on Monday. China’s A-shares will rebound slightly, and SHFE 1310 copper contract will fluctuate between RMB 48,500-49,300/mt after a high opening. In spot market, tightness in liquidity will improve some, but downstream producers will still hold to the sidelines. Spot discount will narrow to RMB 0-100/mt over SHFE 1307 copper contract prices.