SMM Morning Review - 2012/1/5 Copper Market

SHANGHAI, Jan. 5 (SMM) –UniCredit, Italy's biggest commercial lender, launched a rights issue of EUR 7.5 billion at a large discount on Wednesday, while banks' deposits at the European Central Bank (ECB) hit a record high, an indication of investors' low interest in rights issue. Meanwhile, the result of German bond auction was poor, heightening market lingering concerns over the global economic growth. In response, the euro slumped and dragged down commodity markets. Besides, the US later announced factory orders were softer than expected, causing investors to turn to dollar for a safe-haven given the disturbing Europe's debt crisis. As a result, LME copper prices slid and lost support at the 60- and 20-day moving averages before finally ending at USD 7,555/mt, surrendering all the previous day's gains and registering the biggest one-day loss in three weeks.

Asian markets today will continue to digest Wednesday's negative news, while investors will keep cautious ahead of France's bond sales tonight. Comex copper prices met upside resistance this morning, which will serve as guidance for today's LME copper price trends. Nevertheless, the US dollar will confirm support at 80 following surges, which will support low-end LME copper prices. As such, SMM anticipates LME copper prices will fluctuate at low levels during today's Asian trading hours, with prices expected between USD 7,510 -7,590/mt. Chinese stock markets will post week performance. SHFE copper prices will open lower and both long and short investors will  stay out of the market, while SHFE 1203 copper contract prices will move in the RMB 55,200 -55,800/mt range. In the spot market, traded prices will fall below RMB 56,000/mt, and copper discounts are estimated between negative RMB 150-0/mt.