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SMM Copper Market Morning Review (2013-7-18)
Jul 18,2013 09:46CST
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Fed chairman Ben Bernanke told Congress there is no "preset course" and that any decision to reduce its bond-buying program will depend on how the economy performs.

SHANGHAI, Jul. 18 (SMM) – Fed chairman Ben Bernanke told Congress there is no "preset course" and that any decision to reduce its bond-buying program will depend on how the economy performs. He said the Fed will maintain or increase those purchases if the economy deteriorates, and scale back the program should the economy improves more than the Fed expects. His remarks triggered worries over precious metal market and pushed the US dollar index higher. US stock market rallied, while commodity prices fell. Capital flooded into US stocks and ETF. LME copper tumbled to USD 6,867/mt before closing at USD 6,899/mt, down over 1%. LME copper positions decreased by 8,422 lots, the second sharp decline this week.

The market overnight was focused on US Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee. He defended for easing policies again, and insisted that the Fed will likely stop bond purchasing plan in mid-2014, with unemployment rate around 7% by then, but emphasized monetary policies will also depend on economic data. The Fed released its Beige Book saying US economy continued to grow mildly during June and early July, and manufacturing activities in most US regions continued to expand, with manufacturing orders, sales or output increasing. That triggered market concerns that the Fed will scale back asset purchasing at anytime, pushing up the US dollar index to close up 0.23%, and weighing down base metals prices. Bernanke will continue to testify before the Senate today.

Bank of UK's meeting minutes show the bank will maintain current assets purchasing scale by a 9-0 voting. Mark Carney's also supported to maintain existing policies unchanged and opposed to expand easing policies, causing market concerns that England will further loosen its monetary policies to decrease.

China's Finance Minister Lou Jiwei spoke in Washington July 11, stating that China will not push massive financial stimulus policies this year, and only adjust policies slightly to boost economic growth and job market with the precondition that financial deficit remains unchanged.

European and US stocks closed with gains, refraining base metals declines; Asian-Pacific stocks were mixed; LME base metals prices closed with declines except for tin and nickel.

LME copper will consolidate at USD 6,860-6,940/mt during Thursday’s Asian session as selling pressure will ease. China’s A-shares will remain weak, and SHFE 1311 copper contract may fall by almost RMB 800/mt after a low opening, with prices between RMB 49,300-50,000/mt. In spot market, cargo holders will be more willing to sell at highs against falling SHFE copper. Spot premium of RMB 100-200/mt is expected over SHFE 1308 copper contract prices. 

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