Copper price fluctuations will further intensify wait-and-see sentiment

Shanghai copper was slightly red in the morning on Monday, and weakened all the way during the day, closing down 0.
22%, and the futures price fell back to around
the 69000 line.
Non-farm payrolls were weaker than expected, but Fed officials remained hawkish, copper spot rose, and futures prices continued to run
weakly.

On the macro front, the US non-farm payrolls data for November was far below expectations, and the Omicron variant continued to spread, and market risk aversion heated up
.
Recently, the Fed abandoned the inflation transitory theory, and officials frequently sent hawkish signals, supporting the strengthening of the dollar index
.
China announced a 50 basis point
reduction across the board on December 15.
This is the second RRR cut this year, with a weighted reserve ratio of about 8.
4%
after implementation.
The RRR reduction will release 1.
2 trillion yuan, but it will be mainly used to hedge the maturity MLF900 billion
.
RRR reduction is part of stabilizing the economy, and the short-term has an incentive effect on the financial market
.

In terms of news, Indonesia plans to stop copper ore exports in 2023, but self-production and self-sales have formed a trend, so the impact is limited
.
At present, downstream demand is still weak, and the wait-and-see mood is heavier, but domestic and foreign inventories maintain a trend of dematerialization, and the market shows a tight supply situation
.

Fundamentally, the disturbance at the mine end has increased, and important ports in northern China have been affected to varying degrees under the disruption of the epidemic, and the TC index fell significantly
in November.
At the smelting end, the national power rationing basically ended, but due to the interference of the mine end and the decline in sulfuric acid prices, the production enthusiasm of smelters was inhibited, and the output of electrolytic copper in November was difficult to return to the high level
in the second quarter.

The consumption side showed that the off-season was not light, the end of power rationing was superimposed on the marginal improvement of real estate, and the PMI of the copper industry rose
in November.
In terms of inventories, the LME and SHFE continued to destock, and SHFE has fallen to its lowest level
since July 2014.
Under the condition of weak macro and strong fundamentals, copper price volatility will further intensify
.

At present, the European and American economies are strong, and the toxicity of Omicro is still to be observed, but it seems that the impact is weakening, and the domestic announcement of RRR reduction is relatively large, coupled with the expectation of relaxing real estate regulation, pessimistic expectations are repaired, and short-term incentives continue
.
Overall, the overall shift in copper prices this week, the impact of Fed interest rate hike expectations and market concerns about the Omicron variant weighed on
copper prices.