SHANGHAI, Nov. 22 (SMM) – Three-month copper on the London Metal Exchange broke through USD 7,000/mt to USD 7,060/mt before closing Thursday up at USD 7,043/mt, buoyed by expanding US manufacturing activity and falling initial jobless claims in the US.
New claims for state unemployment benefits in the US dropped to a 2-month low of 323,000 last week, signaling further improvement in US labor market. Markit’s flash US manufacturing PMI for November hit an 8-month high and capped forecasts. US PPI dipped 0.2% in October, down for a second straight week. This suggest inflationary pressure in the US remains low and leaves room for the US Federal Reserve (Fed) to keep monetary policy accommodative. Janet Yellen is one step closer to becoming the Fed’s first female head after the Senate Banking Committee voted 14-8 to send her nomination for consideration before the full Senate for a final vote.
The euro zone’s flash manufacturing PMI for November was in line with estimate at 51.5, but composite PMI was worse than expected at 51.5, dragged down by falling service PMI. Germany’s flash manufacturing PMI for November hit a 29-month high of 52.5. However, France saw its flash manufacturing PMI tumble to a 6-month low of 47.8. The euro rose to 1.3477 against the greenback after ECB President Draghi’s comments hinted that the ECB will not introduce negative deposit rate for the immediate term.
The Bank of Japan (BOJ) decided to keep its monetary policy unchanged, having little impact on the market. Nevertheless, BOJ governor’s remarks that the BOJ will adjust monetary policy once risks arise triggered expectations for easing monetary policy, sending the yen down.
The People’s Bank of China (PBOC) launched RMB 35 billion and RMB 33 billion in reverse repurchase operations on Tuesday and Thursday, respectively. Only RMB 9 billion 7-day reverse repos were due in open market this week, leaving a net injection of RMB 59 billion into the open market.
The US dollar index trimmed 0.01%, while the euro added 0.28% against the greenback. Chinese and European shares mostly fell, while US stock markets rose across the board. Base metals on the LME swung between gains and losses.
Expectations for easing monetary policy in the US will push LME copper up, but any upside space will be limited due to technical resistance. LME copper is expected to move within USD 6,980-7,050/mt during Friday’s Asian trading hours. The Shanghai Composite Index will creep higher. SHFE 1402 copper contract will fluctuate between RMB 50,200-50,700/mt after a high opening. In spot markets, a premium of RMB 80-180/mt is expected over SHFE 1312 copper contract.