SMM Morning Review - 2012/2/29 Copper Market

SHANGHAI, Feb. 29 (SMM) –Reports revealed Tuesday that the European Central Bank (ECB) would likely provide nearly EUR 500 billion liquidity in another longer-term refinancing operation (LTRO) this week, allowing the euro to move at high levels and helping stabilize commodity markets. In addition, media claimed China's banking regulator would permit banks to offer new loans to those local governments that failed to finish investment projects, to ensure their completion, which injected momentum to the slackening Chinese consumption. As a result, LME copper prices moved higher and easily broke the resistance at USD 8,600/mt before climbing to USD 8,689/mt. Nevertheless, the US later announced durable goods orders for January slipped by 4.0%, well higher than estimations of a drop of 1.0%, and the biggest decline since January 2009. This greatly hurt market confidence and led to profit-taking by investors. Consequently, LME copper prices trended down and narrowed the daily gains. However, at the tail of trading, the US again reported the upbeat reading in February's consumer confidence index, the highest in a year, supporting US equity markets to move at highs, with the Dow Jones Industrial Average closing above 13,000 for the first time in recent 4 years. LME copper prices therefore fluctuated narrowly below USD 8,600/mt, and finally ended at USD 8,565/mt, an increase of USD 55/mt. The proportion of cancelled warrants to total LME copper inventories still stood high at 29.74% Tuesday.

Positive news in the market outweighs negative one today. Comex copper prices rose this morning, while investors are commonly optimistic over ECB's LTRO move today. Hence, LME copper prices will again challenge resistance at USD 8,600/mt during today's Asian trading session, with prices expected between USD 8,500-8,670/mt. Chinese stock prices will keep moving at highs, with prevailing pressures at 2,450 points. SHFE copper prices are likely to increase after the opening, and test resistance at RMB 61,000/mt further, while SHFE 1205 copper contract prices will fluctuate in the RMB 60,500-61,500/mt range. Spot copper discounts are estimated to expand to between negative RMB 500-400/mt versus SHFE 1203 copper contract.