SHANGHAI, Jul. 11 (SMM) – Investors are anticipating that China will introduce loose monetary policy given the downbeat economic figures. China’s imports of copper, copper alloy and semi-finished goods grew 9.7% YoY in June, lending support to copper prices. The US dollar slipped against a basket of major currencies following the release of the US Federal Reserve (Fed)’s June policy meeting minutes and Chairman Bernanke’s speech. The NASDAQ hit a fresh 13-year high and European shares closed 0.1% higher. Crude oil prices gained 2.9% to close at USD 106.52/barrel. Gold prices climbed 0.1%. These helped LME copper hit a high of USD 6,835/mt and close at USD 6,797/mt. Positions have exceeded 310,000 lots. Great volatility is expected in copper prices.
US Federal Reserve (Fed) Chairman Bernanke said Wednesday the Fed will keep QE in place over a long time to come given the low inflation and tight fiscal policy. Bernanke added that there will not be an automatic increase in interest rate when unemployment hits 6.5%. This alleviated worries that the Fed will scale back QE soon, driving the US dollar index to a new four-day low at 83.45, down more than 1%. Risky currencies, gold and silver prices rose as a result.
The European Commission (EC) announced the revised rules of the banking crisis response on Wednesday. Shareholders and subordinated creditors of troubled banks are asked to bear losses before government provides financing. The European Commission proposed procedures for handling failing banks with a EUR 55 billion backstop, setting up a showdown with Germany over control of taxpayers’ cash. Spokes person of the German government said the proposal does not give the EC the power to set up a banking settlement mechanism within the framework of European Union pact and said European banking union may be delayed. Luxembourg PM Junker announced his resignation July 10 and proposed an election should be held in advance. Luxembourg is the third country in the euro zone following Greece and Portugal that has a political crisis.
According to China Customs, China’s imports and exports hit USD 321.51 billion in June, down 2% YoY. Exports declined 3.1% to hit the lowest since October 2009. Imports slid 0.7%, down for the second straight month. The decline in imports and exports was due largely to rising foreign exchange and wages as well as slowdown in domestic industrial production. Hence, it will be more difficult for China to accomplish its GDP growth target. Domestic commodity prices are expected to come under downward pressure for the medium term.
LME base metals rose appreciably. London gold and silver prices gained 0.71% and 0.4%, respectively. Initial and continued jobless claims in the US are eyed today, which are expected to continue to improve. Australia’s June unemployment rate and employment are also expected to be upbeat.
A weaker US dollar helped LME copper open higher at above USD 6,900/mt, but upside space should be limited since some investors will close positions during the Asian session, with prices expected between USD 6,830-6,940/mt during Thursday’s Asian session. China’s A-shares will rally, and SHFE 1311 copper contract will open more than RMB 1,000/mt higher and move within RMB 49,000-50,000/mt. In spot market, spot premium over SHFE 1307 copper contract prices will narrow to RMB 20-120/mt.