The US dollar index began to weaken, copper prices to get a boost

During the Chinese Mid-Autumn Festival and National Day holidays, the United States announced the final value of the Markit manufacturing PMI in September, which hit the highest since November last year. Both the new orders index and new export orders rebounded compared with August. These data indicate that the US manufacturing is stabilising, growing market expectations of a soft landing in the US economy. The US dollar index rose surged and broke through the 107 mark. In addition, the US Department of Labor also released non-farm employment data during the Chinese holidays. The number of non-farm payrolls was 336,000, far exceeding market expectations of 187,000, meaning that the US labor market is still hot. The recently released September producer price index also far exceeded market expectations, recording 2.2%, versus the forecast of 1.6%. The continued "dove voices" of Federal Reserve officials caused the US dollar index to fall from high levels.

The manufacturing output PMI of the entire eurozone in the third quarter was well below 50, and the European manufacturing recession continues. The International Monetary Fund lowered the eurozone's economic growth forecast in 2023, down from 0.9% in July to 0.7%. China’s Caixin Manufacturing PMI and Services PMI for September both exceeded 50, indicating that China’s economy is slowly expanding.

A barrage of favourable real estate policies in China issued in August and September gave only limited boost to demand. In view of active dip buying, copper prices will still have some support.

The most active SHFE copper contract prices are expected to move between 66,500-68,000 yuan/mt this week, and LME copper will trade between $8,050-8,200/mt. In China’s domestic spot market, spot copper will trade with discounts of 20 yuan/mt to premiums of 80 yuan/mt over the November contract in light of the changes of the price spread between the SHFE front-month and next-month contracts as well as the supply pressure.