SMM Morning Review - 2011/9/21 Copper Market

SHANGHAI, Sept. 21 (SMM) –The Federal Open Market Committee (FOMC) said Tuesday that it would announce the measures of “selling short-term bonds and buying long-term bonds” to lower long-term interest rates after the two-day monetary policy meeting. Market players believed more monetary policies, especially loose monetary policies, would increase dollar liquidity, so they expected the FOMC would introduce more loose monetary policies to tackle current weak US economy. As a result, the US dollar suffered selling and closed significantly down. Hence, LME copper prices rallied in earlier trading hours, with prices increasing to USD 8,447/mt. However, the US Commerce Department later announced the US home starts for August were down 5% to 571,000 units, dropping to the lowest in the past three months, and also below the economists predicted 590,000 units. The property sector continued to drag down the US economic recovery, which pressured LME copper prices down. Later, the International Monetary Fund (IMF) cut its forecast for global growth in 2012, saying global demand outlook was weak. Dimmed economic prospects further dampened the copper market which was already pressured by the European debt crisis and weak US economy, causing LME copper prices and the US dollar to fall together. As a result, LME copper prices directly slid below USD 8,300/mt from above USD 8,400/mt, continuously setting a new yearly low of USD 8,240/mt. Finally, LME copper prices closed at a recent low of USD 8,249/mt, down nearly USD 100/mt, and panic sentiment was growing in the market.    
 
The Standard & Poor's this morning said the risk of an Italian default was very low, and Fitch also confirmed Germany's AAA rating. The European Central Bank (ECB) announced progress in the second round of talks with the IMF, which will help the euro to remain firm. Bearish sentiment improved a little in the market. Both Comex copper prices and crude oil prices slightly increased this morning. Therefore, LME copper price declines will ease, with prices expected between USD 8,240-8,340/mt during today's Asian trading hours. The Chinese stock markets closed slightly higher, despite a drop in trading volumes, and the movements will remain weak today. HSBC will announce HSBC's manufacturing PMI data for September this morning, and markets are pessimistic about the data. Hence, SHFE copper prices is unlikely to rally, while SHFE 1112 copper contract prices will move in the RMB 61,500-62,800/mt range.