SHANGHAI, Oct. 28 (SMM) – Three-month copper on the London Metal Exchange fell to USD 7,110/mt in early European session last Friday, but recovered most of its earlier losses in late-trade hours, closing USD 10/mt lower at USD 7,180/mt. Technical indicators suggest further declines in copper prices are limited.
US economic indicators announced last Friday were mixed. US durable goods orders in September rose 3.7% from August, well above forecasts and the biggest growth in three months. This was led by a surge in aircraft contracts, masking faltering demand in other durable goods. The figure in August, which showed a 0.1% increase, was revised to show a 0.2% growth. The University of Michigan’s Consumer Sentiment Index for October came in at 73.2, down for a third straight month and the lowest level since November 2011. Looking on the bright side, falling Consumer Sentiment Index strengthened expectations that the US Federal Reserve (Fed) will slow the pace of QE3 exit. This sent the US dollar index down, offsetting concerns over rising short-term lending rates in China. As a result, US shares rose, with S&P 500 Index hitting new high.
Profits at large industrial enterprises in China rose 18.4% YoY to RMB 558.89 billion in September, compared with a 24.2% growth to RMB 483.17 billion in August. Profits at large industrial enterprises in China from January through September totaled RMB 4.04 trillion, an increase of 13.5% from a year earlier and up 0.7% from January-August levels. Increased sales, rising ex-works prices and falling costs are the major contributors to the growth in industrial profits in September. Short-term lending rate in China last Thursday soared to a 6-month high, sparking concerns over tighter liquidity. Investors may pull out of A-share and base metals markets against tightening liquidity.
The US dollar index gained 0.03%. European and US shares generally closed higher, while Asian stocks mostly closed down. All LME base metals rose, except copper and nickel.
LME copper is expected to move in a USD 7,120-7,220/mt range during Monday’s Asian trading hours. The Shanghai Composite Index will fall back as China Securities Regulatory Commission (CSRC) said launching of T+0 settlement is impossible for the near term. SHFE 1401 copper contract, the most active one, will fluctuate between RMB 51,100-51,800/mt. In spot markets, cargo holders will become anxious to sell as liquidity crunch bit in at the month’s end. A contango of RMB 0-120/mt is expected over SHFE 1311 copper contract.