US Election Concludes Followed by Fed Rate Cut, Copper Prices Fluctuate Sharply During the Week

Macro side, the US election concluded this week, with Trump securing the majority of electoral votes and declaring victory. On the same day, the US dollar index surged from 103.34 to a peak of 105.44, and the daily volatility of US bonds hit a yearly high. Base metals broadly declined that day, with LME copper under pressure, dropping from $9,700/mt to $9,300/mt. However, the next day, the US Fed announced a 25BP interest rate cut as expected, aiming to balance the cooling inflation target with the risk of cooling employment. Powell also indicated that future rate cuts might continue. After the rate cut, the US dollar fell back to the mid-104 level, and LME copper rebounded to around $9,500/mt. In China, the General Office of the Standing Committee of the National People's Congress held a press conference, announcing that starting from 2024, an additional 800 billion yuan in local government special bonds will be issued annually for five consecutive years, with a total of 4 trillion yuan to replace implicit debts. SHFE copper fluctuated sharply during the week due to the influence of LME, but strong domestic macro support provided a solid bottom, with overall fluctuations around 75,500-78,000 yuan/mt.

Fundamental side, the SHFE/LME price ratio fluctuated significantly during the week, with suppliers taking advantage of the opened window to set up arbitrage positions. The spot market's transaction center remained low, but a large volume of imports is expected to enter the domestic market in November. In domestic trade, downstream restocking sentiment was high during the week, but suppliers found it difficult to stand firm on quotes due to the impact of imported cargoes. There was a noticeable price spread between the east China and south China markets. Spot premiums moved downwards after a higher opening during the week. Looking ahead to next week, with the US CPI data release imminent and the Fed's long-term loose liquidity expectation unchanged after another rate cut, the Trump administration's future fiscal policy to expand the deficit and the cooling employment market might increase the pressure on the Fed to cut rates, potentially lowering the target rate for rate cuts. Copper futures' short-term volatility is expected to increase. LME copper is forecast to run in the range of $9,350-9,750/mt, and SHFE copper is forecast to run in the range of 74,500-78,000 yuan/mt. In the spot market, with the execution of long-term contracts for the year gradually ending and negotiations for 2025 long-term contracts approaching, spot market demand is cooling, and market trading sentiment will gradually weaken next week. Spot prices against the SHFE copper 2411 contract are expected to range from a discount of 50 yuan/mt to a premium of 50 yuan/mt.