SMM Copper Market Morning Review (2014-3-6)

SHANGHAI, Mar. 6 (SMM) – US stocks were mixed Wednesday as the ADP job data fell short of estimates, and ISM index indicated slow growth in the sector. LME copper prices thus gave back earlier gains and closed down USD 20/mt at USD 7,029/mt.

SHFE most active copper contract prices opened at RMB 49,320/mt at night session of Wednesday. The prices fell to a low of RMB 49,160/mt before rising to RMB 49,430/mt, and finally ended the session at RMB 49,220/mt, down RMB 90/mt.

The US ISM non-manufacturing PMI sank to a four-year low of 51.6 in February, lagging behind the 53.5 forecast and January’s 54.0. The US private sector added 139,000 jobs in February, shy of the 155,000 expectations, and gains in January were revised lower from 175,000 to 127,000, according to ADP report. Goldman Sachs and Deutsche Bank cut their projections for non-farm payrolls as a result. Nevertheless, the Fed’s Beige Book indicated manufacturing in most of the federal districts was still expanding mildly despite adverse weather conditions which affected hiring and consumption, and labor market continued to see improvement.

In the euro zone, the final service PMI for February was revised up to 52.6, and Composite PMI was finalized at 53.3, both hitting a six-month high. Retail sales in the currency union grew by 1.6% on the month and 1.3% YoY in January, beating forecast and December’s data.

China’s forex receipts rose by RMB 437.4 billion in January, the highest since last October and growing for six months in a row. New forex receipts in December were RMB 272.9 billion. The increasing forex receipts also explained the PBOC’s continuous bond repurchases.

Most European and US stocks declined Wednesday, and LME base metals rose initially but then gave back earlier gains.

Russia sold large sum of dollars and Russian lawmakers were reportedly working on a bill to allow the confiscation of property, assets and accounts of European or US companies if sanctions are imposed on Russia, meaning the Ukraine crisis has not been settled. In this context, SHFE base metals are expected to fall slightly today.

SHFE 1405 copper contract prices may move at RMB 48,900-49,500/mt on Thursday, and spot copper in China should be offered at discounts of RMB 60-150/mt against the SHFE current month copper contract prices.