SMM Morning Review - 2011/10/18 Copper Market

SHANGHAI, Oct. 18 (SMM) –German Finance Minister Wolfgang Schaeuble said Monday that European governments would not propose the final solution to the European debt crisis during the October 23rd summit, dampening market players’ previous optimistic sentiment, and again triggering investor doubts about the European Union’s (EU) capability in solving the debt crisis in this region. Later, the US announced the Manufacturing Index of the Federal Reserve Bank of New York slipped again in October, down by 8.48, which also failed to support market confidence. Furthermore, as market investors were eagerly awaiting China’s GDP data to be announced on October 18th, risk aversion sentiment was growing again, helping the US dollar index increase to 77 and US equity markets slump by nearly 2%. As a result, LME copper prices fell back from a high of USD 7,660/mt, falling below USD 7,500/mt. Finally, LME copper prices closed at USD 7,460/mt, a drop of nearly 1.4%.

After German warned the markets not to hold great hope on the October 23rd summit, the spokesman of German chancellor this morning said the implementation of the promised solution couldn’t solve all the debt woes in Europe. Therefore, the Euro will likely move lower today. Coupled with a return of 77 in the US dollar index, LME copper prices will meet great resistance at the high-end. On the other hand, market focus will also be on China’s GDP data to be released this morning, and markets expect the data to remain above 9%, which will strongly support LME copper prices. Hence, LME copper prices will fluctuate around the 5-day moving average of USD 7,460/mt, with prices expected between USD 7,330-7,480/mt during today’s Asian trading hours. Chinese stock market will open lower today due to significant declines in US equity markets overnight. Together with the listing of China Hydropower Co., Ltd. today, SHFE copper prices will be weighed down, but with solid support at the daily moving averages and RMB 54,800/mt, with prices estimated between RMB 54,700-56,000/mt.