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US data released overnight were upbeat. Although US July IBD/TIPP economic sentiment index was 47.1, below expectations and the previous month, US May factory orders rose by 2.1%, compared to 1% in the previous month. US home prices in May increased by 12%, the largest growth in seven years, and US June automobile sales also grew steadily, and are expected to hit a record high in five and a half years.
Portuguese Finance Minister Vitor Gaspar resigned. He has been blamed for pushing tax increase and salary cuts since an agreement of the bailout plan was reached in 2011 and his resignation will likely affect whether the country will exit bailout by the EU/IMF as planned. The Socialist Party then stated the government will fail and called for new election. But the market believes the country will not hold an election soon as the governing coalition is supported by conservative president, and since it won the majority in the parliament. Last week, the European Central Bank (ECB), IMF and European Commission (EC) returned to Greece to assess if the country will receive additional EUR 8.1 billion of bailout funds as planned. It was believed international creditors will likely refuse to pay additional bailout funds and will pay the EUR 8.1 billion bailout funds in three batches to put pressure on Greece and require Greece to accelerate reform. The ECB, IMF and EC may also require Greece to use additional tightening policies. Market capital thus flowed to the US dollar, pushing up the US dollar index by 0.5.
China's central bank inquired primary dealers yesterday concerning repurchasing in the open market and Central Bank Bills, but did not announce the issuance of Central Bank Bills. The central bank suspended Central Bank Bill issuance last Tuesday to stabilize liquidity; the Shanghai Composite Index closed above 2,000 yesterday, boosted by the growth in enterprise market and medium-to-small enterprise stocks, and the market will continue to focus on medium-to-small enterprise stocks.
European and US stocks markets mostly dropped; LME base metals prices generally fluctuated.
LME copper will be kept within the 5-day and 20-day moving averages due to a lack of buying, with prices expected between USD 6,860-6,960/mt during the Asian trading session on Wednesday. China’s A-shares will edge down, and SHFE 1310 copper contract will move within RMB 49,500-50,200/mt. In spot market, middlemen will be eager to sell, but downstream producers will purchase only as needed. Spot discount of RMB 0-80/mt and premium of RMB 0-20/mt are expected over SHFE 1307 copper contract prices.
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