SMM Morning Review - 2012/2/3 Copper Market

SHANGHAI, Feb. 3 (SMM) –The macroeconomic news front was relatively quiet overnight. The euro was still under pressure since no certain news came out of Greek debt talks, which dragged down commodity price trends. Furthermore, although Federal Reserve Chairman Ben Bernanke said there were signs of improvement in the US economy, he called the government to make efforts in cutting long-term deficit at the same time. Nevertheless, the US economic data later announced was better than market expected, but the market still lacked guidance as a whole ahead of the release of the US non-farm payrolls due Friday. In this context, US equity markets swung between gains and losses, and investors conducted profit-taking. LME copper prices therefore remained weak and suffered a round of rapid slides at the tail of trading, with the low-end price touching USD 8,295/mt and closing price at USD 8,330/mt, surrendering all the previous day's gains.

Comex copper prices experienced declines this morning, while unclear prospects for the euro zone area still weigh on LME copper price trends somehow. However, Chinese Premier Wen Jiabao's positive remarks helped cap the euro's declines to some extent. Moreover, LME copper prices were well supported at the low-end but also faced great upside resistance. As such, SMM anticipates LME copper prices will drift lower slightly to between USD 8,280 -8,420/mt during Friday's Asian trading session. Chinese stock markets will test 2,300 points for several times since US equity markets swung between gains and losses overnight. Therefore, SHFE copper prices will remain weak after a low open, while SHFE 1204 copper contract prices will fluctuate in the RMB 59,200-60,100/mt range. Spot copper discounts are estimated between negative RMB 350-200/mt against SHFE 1202 copper contracts.