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SMM Copper Market Morning Review (2013-7-4)
Jul 4,2013 10:05CST
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Employment in the US private sector continued to grow in June and initial jobless claims last week fell, both better than forecasts.

SHANGHAI, Jul. 4 (SMM) – Employment in the US private sector continued to grow in June and initial jobless claims last week fell, both better than forecasts. Improving US labor market offset worries over political turmoil in Portugal, pushing US shares up slightly. Gold prices rallied 0.7% overnight as the decline in the US ISM Services Index and European debt crisis as well as political turmoil in Egypt and Portugal turned investors to gold as a safe haven. LME copper hit a high of USD 6,999/mt due to improving market fundamentals and selling at highs, and closed at USD 6,994/mt, up more than 1%. LME copper, however, are facing downward risks given weakness in other base metals and mixed economic figures.  

Concerns over European debt crisis increased again due to Portugal political chaos. Portugal Foreign Affairs Minister and right-wing Portuguese People's Party leader Portas submitted his resignation, and if he resigned, the People's Party will likely exit the governing coalition, so the governing party will be unable to win the majority of the parliament, which may lead to government collapse. As market concerns spread, Portugal's government bond yields surged to above 8%, while the euro fell to a low of 1.29. But positive euro zone economic data boosted market confidence. Euro zone June Markit PMI was finally 48.7, a record high in 15 months, and Spanish and French service PMIs were both better than expectations, while Germany's service and comprehensive PMI was below expectations, but still above 50.

US ADP employment increased by 188,000, higher than 160,000 expected. The number of initial jobless claims last week was 343,000, also better than 345,000 expected. But US June ISM non-manufacturing index was 52.2, the lowest since February 2012, and trade deficit expanded to USD 45 billion.

Chinese Premier Li Keqiang held a State Council executive meeting July 3 concerning rectification and reform work and to activate reserve capital. The China (Shanghai) Free Trade Pilot Zone Plan and the Regulations of Foreigners Entry and Exit China (draft) were passed at the meeting.

European and US stocks markets were mixed; LME copper, lead and tin closed with gains, while other base metals dropped.

LME copper will hardly break through USD 7,000/mt due to market caution ahead of US non-farm employment report, with prices expected between USD 6,930-7,000/mt during the Asian trading session on Thursday. China’s A-shares will edge down, and SHFE 1310 copper contract will drift higher to RMB 50,000-50,700/mt after a high opening. In spot market, rising SHFE copper will allow cargo holders to hold prices firm. Spot discount of RMB 0-20/mt and premium of RMB 0-80/mt are expected over SHFE 1307 copper contract prices. 

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