SMM Copper Market Morning Review (2013-7-12)

SHANGHAI, Jul. 12 (SMM) – The US Federal Reserve (Fed) said it will remain committed to monetary stimulus for the foreseeable future given the low inflation and fragile labor market, turning investors to risky assets. US shares soared, with Dow Jones and S&P hitting an all-time high. European stocks closed 0.6% higher. LME copper found its high at USD 7,049/mt, but trimmed some of its earlier gains at the tail of the session due to a strengthening US dollar, and finally closed at USD 7,002/mt, up over 3%. 

Fed Chairman Bernanke’s speech on June 19 was in consistent with the meeting minutes released by the FOMC on July 10. Initial jobless claims in the US in the week ending July 6 increased 16,000 to 360,000, higher than the 340,000 forecast and revised 344,000 as well as preliminary 343,000. This adds to uncertainty in the US job market. The US dollar index dipped from 83.05 to 82.93, but the foreign exchange of the US dollar then rose. Gold and silver prices rose to USD 1,289.30/oz and USD 20.17/oz, respectively during the European session. Positive non-farm employment against growing initial jobless claims aroused doubt over the authenticity of the figures.  

The ECB stated it will keep key interest rates at current level or even lower level for an "extended period". The key ECB interest rates can be reduced further if warranted by the evolving outlook for price stability, the central bank said. Unemployment rate in Greece rose from 26.8% in March to a record high of 26.9% in April. The Greek government continues austerity against the country’s prolonged economic recession. Portugal's government has requested a delay in the next regular review of the country's bailout by its creditors due to the ongoing political tension, the country’s Finance Ministry said. The euro will remain under downward pressure as a result.

Yi Gang, Vice Governor of the People’s Bank of China (PBOC) said the RMB has appreciated 2% against the US dollar since early this year, indicating China’s foreign exchange reform has yielded some fruit. Yao Jian, spokes person of the Ministry of Commerce said China will face even more grim foreign trade situation for the rest of this year, which at the same time will serve as an opportunity for Chinese companies to improve their competitiveness and expand value chain. 

LME base metals ended in positive territory, except for lead. Three major stocks in the US gained more than 1%. The Shanghai Composite Index soared 3.23%. Industrial production in the euro zone in May is due today, which is expected to slip. However, the University of Michigan Survey of Consumer Confidence Sentiment for July is expected to improve, which will lend support to commodity prices.  

Inspiring remarks by Bernanke will help LME copper consolidate between the 30-day and 60-day moving averages, with prices expected between USD 6,960-7,050/mt during Friday’s Asian session. China’s A-shares will extend gains, and SHFE 1311 copper contract will lack upward momentum as longs will close positions today, with prices between RMB 50,000-50,800/mt. In spot market, spot discount of RMB 0-100/mt is expected over SHFE 1307 copper contract prices.