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SMM Copper Market Morning Review (2014-6-6)
Jun 6,2014 09:38CST
price review forecast
Source:SMM
On Thursday, the European Central Bank announced to cut its key interest rate from 0.25% to a new record low of 0.15%, and lowered overnight deposit rate from 0% to -0.1%.

SHANGHAI, Jun. 6 (SMM) – On Thursday, the European Central Bank announced to cut its key interest rate from 0.25% to a new record low of 0.15%, and lowered overnight deposit rate from 0% to -0.1%. Besides, ECB governor Mario Draghi said the central bank is in preparation for QE and would suspend the SMP, instead it created a targeted EUR 400-billion loan program (TLTRO) to incentivize banks. The euro slumped in the wake of the news but soon rebounded. Investors, though bearish towards the euro, were optimistic about euro zone outlook. Thus, European shares rose across the board. LME three-month copper hovered at USD 6,780/mt and closed at USD 6,783/mt.

SHFE most active copper contract prices opened at RMB 48,070/mt during Thursday’s night trading and moved higher. The upward trend in the August copper contract was blocked at RMB 48,330/mt, with prices ending the session RMB 220/mt higher at RMB 48,330/mt. Traded volumes for the August copper contract were around 130,000 lots, and positions fell by 1,212 lots.

The European Central Bank lowered its benchmark interest rate to a record low of 0.15% from 0.25%, and also imposed a negative interest rate of 0.1% on deposits, down from zero. Mario Draghi, President of the ECB, also announced at subsequent press conference that the ECB would end the Securities Markets Programme (SMP) and is mulling over purchases of asset-backed securities (ABS). He added that the central bank will be conducting a series of targeted longer-term refinancing operations (TLTROs), which will mature in 2018 and be worth EUR 400 billion. Meanwhile, the ECB president signaled that the ECB has started preparing for quantitative easing (QE). A series of these accommodative monetary policies sent European and US shares up, helping boost base metals prices. In addition, the Bank of England put its benchmark interest on hold Thursday at a low of 0.5% and maintained 375 billion pounds of bond purchases to prop up the country’s economic recovery.

The US Labor Department reported that the country’s initial jobless claims added 8,000 to 312,000 for the week ending May 31. MarketWatch also revealed that the jobless claims stood at a seasonally adjusted rate of 311,000 based on the average estimate by the surveyed economists. Meanwhile, the jobless claims for the week ending May 23 were revised slightly to 304,000, up from the preliminary figure of 300,000. The continuing jobless claims for the week ending May 24 fell 20,000 to a seasonally adjusted rate of 2.6 million , hitting the lowest level since October 2007. Following the release of these reports, US stock indices and futures prices expanded earlier gains, while US Treasury prices edged up.

HSBC’s China service PMI for May released Thursday fell to a fresh 4-month low of 50.7, pointing to persistently weak sentiment at private companies. The International Monetary Fund (IMF) stated Thursday that the Chinese economy is expected to grow 7.5% this year, helped by improving economic outlook across the globe.

The US dollar index eased 0.38%. The euro ticked up 0.45% against the US dollar. Global shares rose across the board. LME base metals prices showed mixed performance.

On June 6, SHFE copper for August delivery may trade between RMB 48,000-48,280/mt, and physical copper in China is expected to be offered at premiums of RMB 400-520/mt against SHFE 1406 copper contract prices.  

LME copper
SHFE night trading

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