SMM Morning Review - 2012/2/28 Copper Market

SHANGHAI, Feb. 28 (SMM) –In Monday's early trading session, the G20 meeting failed to reach agreements on extending bailout measures to Europe, and leaders in the G20 said Europe also need prepare more funds to fight its debt crisis if it wants to get more help from other countries. This meant European leaders should offer more liquidity to ease the region's debt crisis during this Thursday's EU summit, triggering market worries Europe's debt crisis would probably deteriorate. In response, the euro suffered profit-taking and retreated to levels near the 5-day moving average. Besides, oil prices surged to a 10-month high due to the Middle East issue, stoking market fears over a global economic recession that could hurt the already weak global economic recovery. Crude oil futures prices therefore closed down by 1.1%, ending a high close for seven consecutive days. As a consequence, LME copper prices moved lower during Monday's US and European trading session, with an intraday low touching USD 8,420/mt. Nevertheless, the US later announced a new round of upbeat economic data, with signed contracts for home resales increasing to a nearly two-year high in January, another signal that the US housing market is recovering. Hence, US equities rose significantly and helped LME copper prices rally and finally close higher at USD 8,510/mt, a slight gain of USD 10/mt. In other news, the proportion of cancelled warrants to total LME copper inventories stood high at above 29% Monday, which will help LME copper prices show more resilience over the near term. 

Standard & Poor's lowered Greece's credit rating to "selective default" Monday after the closing time, and placed credit outlook for European Financial Stability Facility (EFSF) to negative. However, Germany's approval of the second Greek rescue accord can bolster the euro, which will keep fluctuating in the previous band. Overall market tone will be cautious. Similar to Monday, LME copper prices will fluctuate between USD 8,420 -8,550/mt during Tuesday's Asian trading session. Chinese stock markets will move narrowly around 2,450 points. SHFE copper prices will continue to post weaker performance than LME copper prices, while SHFE 1205 copper contract price will lurch in the RMB 59,900-60,800/mt range. Spot copper discounts are likely to edge higher to between negative RMB 480-350/mt due to market surplus and financial factors.