Copper Prices Volatility Increased [Institutional Commentary]

Macro side, the US stock market showed weakness again, indicating that investors' expectations of a US recession have intensified, especially with the rebound in short-term inflation expectations, while stagflation expectations remain unchanged. However, two voting members of the US Fed and Fed Chairman Powell hold differing views on inflation expectations, believing that tariffs have a non-transitory impact on inflation and that long-term inflation issues should be focused on. The timing of interest rate cuts may be longer than expected, showing a slightly hawkish stance. Domestically, China's Ministry of Finance stated that fiscal policy in 2025 will be more proactive, with an increase in the fiscal deficit ratio and the arrangement of a larger scale of government bonds, aiming to support comprehensive expansion of domestic demand in 2025.

The market has begun to expect that the new US president will impose a 25% tariff on copper. Before the policy is implemented, US copper has consistently outperformed other markets, accompanied by the widening of the price spread between US copper and LME copper, driving global copper prices higher and becoming the "engine" of the market. However, judging from yesterday's performance, before the implementation of reciprocal tariffs on April 2, uncertainty has also led to some bulls exiting the market, and the market is also easing pressure in advance. Therefore, during this period, copper prices may fluctuate and volatility may increase, and the performance before and after may determine the later rhythm. Domestically, the center of spot premiums/discounts quotations will slowly rise, but the actual change in absolute prices will focus more on the performance of US copper and LME copper.

(Source: Everbright Futures)