SMM Morning Review - 2012/1/9 Copper Market

SHANGHAI, Jan. 9 (SMM) –Fitch downgraded Hungary's credit rating to junk status last Friday, triggering market worries that the European debt crisis may hurt the industrial economy. In response, the euro extended losses, which caused LME copper prices to slide below USD 7,500/mt. The US later announced the better-than-expected non-farm payrolls and unemployment rate, helping LME copper prices increase and pare some of the previous declines before finally ending flat at USD 7,574/mt. Overall, as situation in the US and Europe diverged noticeably, market risk aversion was growing. As a result, the US dollar surged to a 16-month high, which was one of the factors that led US equities to swing between gains and losses last Friday, but caused LME copper prices to fail to rise sharply.

Obama stated last Friday evening that he will further push ahead good employment plan based on current foundations and already gets support from some enterprises and related officials, which will support LME copper price trends today. However, Comex copper prices slumped this morning, and the euro opened lower, imposing great pressures to LME copper opening prices and daily movements. As such, SMM expects LME copper prices will move between USD 7,520 -7,620/mt during today's Asian trading hours, with a similar price trend last Friday. In Chinese markets, the National Financial Work Conference has been successfully held, and statements of some government officials will help lift Chinese stock markets over the near term. In this context, SHFE copper prices will move higher, and SHFE 1203 copper contract prices will fluctuate in the RMB 55,400 -56,200/mt band. Spot copper offers are estimated between negative RMB 150-0/mt versus SHFE 1201 copper contracts.