SMM Copper Market Morning Review (2013-10-17)

SHANGHAI, Oct. 17 (SMM) – Leader of the Senate announced Republicans and Democrats in the Senate have reached a compromise to reopen the government till January 15 and extend the debt ceiling deadline to February 7, boosting market sentiment. In this context, US shares rose sharply, with the S&P up 1.4%. European stocks hit a 5-year high. Gold and crude oil prices also rebounded. LME copper also recovered earlier losses and hit a high of USD 7,300/mt, closing Wednesday USD 3/mt higher at USD 7,265/mt. However, the preliminary agreement over the debt ceiling talks was within expectations, offering limited upward impetus to the red metal.   

House Speaker Boehner said his party will continue to fight Obamacare, but will not block the bipartisan agreement reached by members of the Senate. His comments fueled a rally in stock and commodity markets. 

Inflation rate in the euro zone in September fell to the lowest since February 2010 at 1.1%, below the 2% target set by the European Central Bank (ECB). This signals slow recovery in the European economy and leaves room for the ECB to keep loose monetary policy in place. 

The Shanghai Composite Index plunged on Wednesday, tumbling over 3,900 points or 65% over the past six years. The number of listed companies grew from 1,500 in late October 2007 to current 2,489. Market value of listed companies, however, plummeted to RMB 24 trillion from RMB 28 trillion.     

European and US stock markets generally closed up. Base metals on the London Metal Exchange gained across the board.

LME copper is expected to move within USD 7,250-7,320/mt during Thursday’s Asian trading hours. The Shanghai Composite Index will face correction. SHFE 1401 copper contract will fluctuate between RMB 52,200-52,800/mt after a high opening. In spot markets, rising SHFE copper will leave some speculators anxious to sell, causing backwardation to narrow. A contango of RMB 0-50/mt and a backwardation of RMB 0-80/mt are expected over SHFE 1311 copper contract.