SHANGHAI, Oct. 11 (SMM) – US President Barack Obama met Thursday with House Republicans after he met with Senate Democrats the previous day. These talks are signs of improving ties between two parties and raised hopes for a resolution to government shutdown and debt ceiling issues. Sources indicated that Republican leader proposed a 6-week extension of debt ceiling without attaching any condition in order to mitigate risks of government debt default. This enticed investors to buy risky assets, pushing the Dow Jones up by 2.2%, its biggest gain so far this year. European shares also closed 1.7% higher. LME copper also rose, but upside space was limited by a strong greenback, closing up USD 22/mt at USD 7,139/mt. The fact that US initial jobless claims jumped to a 6-month high last week paled next to the progress made over the debt ceiling talks.
The House of Representatives proposed a 6-week extension of debt ceiling without attaching any condition so as to get Obama to discuss budget and deficit issues. The White House stated progress has been made over the debt ceiling and budget talks between Obama and two parties, greatly reducing risks of government default. This boosted appetite for risks, sending US stocks higher while pulling safe-harbor gold and silver down.
US initial jobless claims in the week ending October 5 rose to 374,000, well above expectations for 310,000. The Labor Department claimed that half of the growth in initial jobless claims was the result of computer system failure in California and that federal government shutdown also led to a 15,000 increase in first-time application for state unemployment benefits. Jobs data released by the ADP last week were also less than satisfying, fuelling concerns over US labor market. Looking on the bright side, however, downbeat employment data will raise expectations that the Fed will keep QE3 in place in October. James Bullard, President of the Federal Reserve Bank of St. Louis, noted it is too early to begin to scale back bond-buying program in October.
The US dollar index ticked up 0.16%. US and European stocks mostly closed up, while Asian shares swung between gains and losses. All base metals on the London Metal Exchange, except aluminum and tin, ended in positive growth territory.
Market sentiment has improved thanks to broken stalemate over US budget talks. LME copper will find technical support at USD 7,080/mt, but will meet strong resistance at the 60-day moving average, with prices expected between USD 7,100-7,180/mt during Friday’s Asian trading hours. The Shanghai Composite Index will drop slightly. SHFE 1401 copper contract is expected to open higher and rise in the afternoon session, but may face selling pressure before the weekend, with prices between RMB 51,2 00-51,800/mt. In spot markets, cargo holders will hold offers firm, with a contango of RMB 0-100/mt and a backwardation of RMB 0-80/mt expected over SHFE 1310 copper contract.