SMM Copper Market Morning Review (2013-10-25)

SHANGHAI, Oct. 25 (SMM) – HSBC’s flash China manufacturing PMI for October and the Federal Reserve Bank of Kansas City’s October manufacturing PMI cheered investors up, lifting base metals prices and driving a rally in US stock markets. However, manufacturing PMI in European countries released in early European session came in disappointing, triggering concerns over copper demand in the euro zone. This sent LME copper down to USD 7,134/mt. Nevertheless, LME copper stabilized later in the day on dip-buying, closing Thursday at USD 7,190/mt.

HSBC’s flash China manufacturing PMI for October came in at 50.9, higher than September’s 50.2 and the forecasted 50.4, lending some support to base metals prices. On the other hand, tightening monetary policy by the People’s Bank of China (PBOC) cast a pall on the market. The central bank suspended reverse repos for three times in a row since last Thursday against growing forex receipts and overheated credit lending. Against this backdrop, the Overnight Rate rose by 30 basis points and China’s A-share suffered a three-day losing streak. Sources indicated that the China Securities Regulatory Commission (CSRC) is planning to issue new shares and preference share simultaneously. The CSRC is expected to seek public opinion regarding pilot program of issuing preference share. The State Council will release documents concerning issuance of preference share. Markets should have stronger reaction to new share issuance. 

The euro zone’s manufacturing PMI rose to 51.3 in October from 51.1, but service PMI fell unexpectedly to 50.9 and composite PMI also slipped surprisingly to 51.5. Germany’s manufacturing PMI also advanced to 51.5 from 51.1, but service PMI surprised markets by declining to 52.3. France saw its manufacturing and service PMI in October slide to 49.4 and 50.2, respectively. US initial jobless claims were 350,000 in the week ending October 19, more than the 340,000 expected. Markit’s US flash manufacturing PMI came in at 51.1, missing forecasts, but still pointing to expansion. The Federal Reserve Bank of Kansas City’s final October manufacturing PMI was 6, beating September’s 2. 

European and US shares generally closed higher. Most base metals on the London Metal Exchange closed with gains. 

LME copper is expected to move in a USD 7,140-7,240/mt range during Friday’s Asian trading hours. The Shanghai Composite Index will consolidate. SHFE 1401 copper contract, the most active one, will fluctuate between RMB 51,400-52,000/mt. In spot markets, cargo holders will refrain from selling at lower prices. A contango of RMB 0-120/mt is expected over SHFE 1311 copper contract.