Last week, copper prices fell back from highs, mainly due to an unexpected rebound in the US Fed's most favored inflation indicator, PCE. On the soft data front, the University of Michigan's long-term inflation expectations hit a 32-year high, while the consumer confidence index continued to decline, exacerbating the risk of stagflation in the US economy. The US Fed may find it difficult to implement an interest rate cut in the short term. Domestically, the YoY decline in industrial enterprise profits in China narrowed in January-February, with some energy-focused central state-owned enterprises achieving counter-trend profits in 2024. The MLF operation again resulted in a net injection, reflecting a moderately accommodative monetary policy stance. On the fundamental side, spot TC expanded further into negative territory, falling below -$20, domestic inventory continued to decline, spot discounts widened, and the near-month contango structure narrowed, with the backwardation structure flattening out after May.
Overall, the risk of stagflation in the US economy is intensifying, and the US Fed may have limited room to cut interest rates within the year. The decline in industrial enterprise profits in China has narrowed, and the effects of the program of large-scale equipment upgrades and consumer goods trade-ins are gradually emerging. On the fundamental side, the tightening supply of concentrate is difficult to reverse, TC has expanded further into negative territory, some expectations for production cuts have been realized domestically, social inventory continues to decline, and while the supply side provides cost support, the weakening macro environment overseas and rising expectations of a global economic slowdown suggest that copper prices will likely continue to pull back from highs in the short term and seek previous support levels.
Risk factors: A dovish shift in the US Fed's stance, easing global trade tensions
(Source: Jinyuan Futures)
