SHANGHAI, Oct. 14 (SMM) – An impasse over US debt ceiling talks was broken last Friday as the House of Representatives proposed a 6-week extension of debt ceiling so as to get US President Barack Obama to negotiate over spending cuts. This boosted appetite for risks, helping US shares extend gains and driving copper prices up. Safe-harbor gold plunged last Friday as markets expected breakthrough progress over US debt ceiling talks. LME copper closed at a session high of USD 7,200/mt, up USD 61/mt. That being said, LME copper suffered its biggest weekly loss in a month.
LME Week ended last Friday. Barclays Bank’s report showed that investors split over LME base metals price trends. Although improving global business confidence and stabilizing Chinese economy are inspiring, prospects for most base metals are not optimistic. Supply is growing at a faster pace and Chinese investors are worried that the Chinese economy may lose momentum. Market players hold neutral or bearish views towards zinc and aluminum prices, while expect copper prices to be little changed. Those market participants turn bullish over nickel prices and expect lead and tin prices to rise, according to polls of attendants to the LME Week.
US debt ceiling talks went back into a stalemate last weekend. Obama abruptly rejected the House of Representatives’ proposal to extend debt ceiling by 6 weeks. This was compounded by the Senate voting down a plan to extend debt ceiling through the end of next year. The talks between Senate Majority leader Harry Reid and Minority leader Addison Mitchell Mitch McConnell will come under the spotlight. This is because Senate leaders have always been able to find a last-minute solution whenever negotiations between the White House and the House of Representatives over fiscal issues failed over the past five years.
The University of Michigan’s preliminary Consumer Confidence Index fell to a year low of 75.2 in October, reflecting dampened confidence caused by partial government shutdown and debt ceiling issues.
China’s imports and exported totaled RMB 2.2 trillion in September, up 3.3% YoY (excluding influence from changes of exchange rate). Exports slid 0.3% to RMB 1.15 trillion, while imports grew 7.4% to RMB 1.05 trillion, leaving a trade surplus of RMB 93.48 billion, down 44.7%. China’s imports of unwrought copper and copper semis hit 457,847 mt, an increase of 18.1% MoM, implying copper consumption in the world’s top consumer turned around.
European and US shares mostly closed up. Base metals on the London Metal Exchange largely rebounded.
China’s foreign trade and copper imports data announced last weekend came in mixed. Markets are anticipating upbeat China CPI and PPI due to be released today. However, investors may sell at highs. LME copper is expected to move within USD 7,120-7,200/mt during Monday’s Asian trading hours. The Shanghai Composite Index will inch down. SHFE 1401 copper contract will test resistance at RMB 52,000/mt, with prices between RMB 51,500-52,200/mt. In spot markets, a contango of RMB 0-50/mt and a backwardation of RMB 0-100/mt are expected over SHFE 1310 copper contract.