SMM Morning Review - 2011/12/14 Copper Market

SHANGHAI, Dec. 14 (SMM) –Markets were still heavily weighed overnight. German Chancellor Angela Merkel opposed to the proposal of enhancing the scale of the euro zone's permanent bailout fund, pushing down European stock markets. Combined with a credit ratings downgrade for four countries in Central and Eastern Europe by Fitch later, the euro tumbled to its lowest level against the US dollar in 11 months, while the US dollar advanced above 80, which dampened commodity markets. Besides, retail sales in the US for November rose less than market projections, and retail inventories stayed flat MoM, a signal of market worries over the seasonal demand for the retail industry. On the other hand, investors were closely focused on Federal Reserve (Fed) policy meeting, where the Fed announced it would keep the existing monetary policy unchanged, but said volatilities in financial markets may threat economic growth, spurring market speculations that the Fed would introduce another round of loose monetary measures. As a result, LME copper prices fluctuated around USD 7,600/mt, and finally closed at USD 7,594/mt with great resistance at the 30-day moving average.

During today's Asian trading hours, the US dollar is expected to pare some of last night's gains, which will support the low-end copper prices, while relatively bearish sentiment will continue to weigh on copper markets. In this context, LME copper prices are expected to fluctuate in a narrow band between USD 7,550-7,650/mt, with solid support at the 60-day moving average. Chinese stock markets will continue to move lower and drag down SHFE copper prices, which tend to move around RMB 56,000/mt and will probably trend downward, while SHFE 1202 copper contract prices will be in the RMB 55,500 -56,500/mt range. Spot copper discounts are estimated between negative RMB 150-50/mt.