SHANGHAI, Oct. 23 (SMM) – Worse-than-expected US non-farm payrolls sparked speculation that the US Federal Reserve (Fed) may delay QE3 exit, sending the US dollar index down to near 79. US construction spending in August capped forecasts and construction spending in July was revised upwardly, leaving markets optimistic that industrial metals demand in the world’s largest economy will improve. Longs entered the market, helping S&P 500 Index sustain a 5-day winning streak and hit new record high. LME copper also rose to USD 7,350/mt before closing up USD 64/mt at USD 7,316/mt. However, speculative activities in LME copper market have waned and longs may take profits today.
The US added 148,000 workers to non-farm payrolls in September, below expectations for an 180,000 increase and falling short of forecasts for three months in a row. Although the US unemployment rate fell to 7.2% from 7.3%, this is not a reflection of recovery in the US economy, as the data has been flattered by lower labor participation rate. Worse-than-expected non-farm employment offered some relief to investors who feared earlier that the Fed might wind down QE3 before 2014. It is rumored that the Fed may even increase the scale of QE3.
Sources indicated that the People’s Bank of China (PBOC) suspended 14-day reverse repurchase operation in open market last Thursday and did not launch 7-day reverse repos yesterday, either, citing faster than normal growth in credit lending in September. The central bank may tighten monetary policy a little bit against rising inflation rate, but will mainly fine-tune its monetary policy such as open market operation, said Song Guoqing, a member of the PBOC Monetary Policy Commission.
European and US shares generally closed with sharp gains. Base metals on the London Metal Exchange ended in positive growth territory across the board.
LME copper is expected to move within USD 7,270-7,320/mt during Wednesday’s Asian trading hours. The Shanghai Composite Index may inch down. SHFE 1401 copper contract, the most active one, will fluctuate between RMB 52,200-52,800/mt after a high opening. In spot markets, eagerness to sell will cause contango over SHFE 1311 copper contract to widen to RMB 50-180/mt.