US Fed Rate Cut Expectations Increase, Copper Prices Closed Higher Overnight [SMM Copper Morning Comment]

Last Friday, LME copper opened at $9,625/mt. Initially, it saw slight fluctuations with a rising focus, reaching a session high of $9,674/mt. It then trended downward, hitting a session low of $9,578/mt at the end of the trading session, and finally closed at $9,586/mt, with a gain of 0.76%. Trading volume reached 16,000 lots, and open interest was 328,000 lots. The most-traded SHFE copper contract opened at 78,690 yuan/mt. It initially hit a high of 79,020 yuan/mt, then trended downward, hitting a session low of 78,230 yuan/mt at the end of the trading session, and finally closed at 78,350 yuan/mt, with a gain of 0.32%. Trading volume reached 48,000 lots, and open interest was 193,000 lots.

Macro-wise, the US core PCE price index for May recorded a YoY increase of 2.6%, the smallest since March 2021. After the data release, traders increased their bets on a US Fed rate cut. However, Fed officials stated that the fight against inflation is not yet won, the US economy is expected to remain resilient, and it is too early to determine when to cut rates. Overnight, copper prices opened higher but trended lower by the end of the session.

Fundamentally, from the demand side, due to the weak performance of copper prices last week and the widening price spread between the current-month and next-month contracts, downstream bearish sentiment was strong. Additionally, as it is mid-year, some companies were engaged in mid-year settlements, affecting the activity in the spot market. Overall consumption did not show a significant recovery. In summary, the US dollar index opened lower, which is expected to provide some support for copper prices. Today, attention will be on China's June Caixin Manufacturing PMI and the US June Manufacturing PMI.