Copper Fundamental Forecast – May 6, 2016

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Published: May 5, 2016, 10:30 UTC

Copper dipped 24 points as the greenback gathered momentum and lackluster Chinese PMI data weighed on the metal. Copper is trading at 2.163. A stronger US

Copper Fundamental Forecast – May 6, 2016

Copper dipped 24 points as the greenback gathered momentum and lackluster Chinese PMI data weighed on the metal. Copper is trading at 2.163. A stronger US currency makes dollar-denominated commodities more expensive for non-US firms. Chinese data showing factory activity in the world’s top metals consumer shrank for a 14th consecutive month has muddied the outlook for metals demand and dulled hopes of economic revival after a credit-fueled rally.

Data due in coming weeks is expected to show China’s economic activity moderated in April after a strong showing in March, adding to questions over whether the world’s second-largest economy is recovering, a Reuters’ poll of economists showed.

The Caixin/Markit survey of purchasing managers in China’s manufacturing sector fell to 49.4 last month from 49.7 in March, the 14th consecutive month of shrinkage. “The Chinese PMI were disappointing. It’s a case of wait and see what the broader Chinese economic data brings,” said VTB analyst. “It all goes back to China.”

Base metals markets are waiting to see if industrial production, investment, loans and property market data for April confirms the pickup seen in March. China accounts for nearly half of global copper consumption estimated at around 22 million tonnes this year.

Global manufacturing growth almost stalled last month as rising prices halted an upturn in new orders, a survey showed. “Headline PMIs eased nearly everywhere in April. Most disappointing is China’s Caixin survey, which had nearly breached the surface in March, but then took another dive. Japan, too, stumbled,” HSBC said in a note.

“Also note Taiwan’s slide, an economy highly sensitive to the global industrial cycle as well as the Chinese economy. Korea, by contrast, came up for air, but barely. In the West, things look softer as well.” Three-month aluminium fell 0.2 percent to $1,630 a tonne.

However it gained about 10 percent in April and is trading near its highest since July last year.

Higher prices are partly due to a decision in December by Chinese smelters to shut capacity, a move that was followed by plans by six smelters to form a joint venture to possibly stockpile up to 1 million tonnes of the metal. “Aluminium prices have risen too much, too fast. It’s going to pull in more supply,” INTL FCStone analyst said.

“This year should be a year of transition, we need to see more supply leave the market, companies to shut down smelters or merge them, not open new ones. But none of this is happening right now.”

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Upcoming Economic Events that you should be monitoring:

Friday, May 6, 2016

Cur.	Event	Actual	Forecast	Previous
USD	FOMC Member Bullard Speaks
USD	FOMC Member Kaplan Speaks
USD	FOMC Member Lockhart Speaks
USD	FOMC Member Williams Speaks
AUD	RBA Monetary Policy Statement
USD	Average Hourly Earnings (MoM) (Apr)		0.3%	0.3%
USD	Nonfarm Payrolls (Apr)		202K	215K
USD	Participation Rate (Apr)			63.0%
USD	Private Nonfarm Payrolls (Apr)		193K	195K
USD	Unemployment Rate (Apr)		5.0%	5.0%
USD	Baker Hughes U.S. Rig Count			332