SHANGHAI, Mar. 1 (SMM) –The European Central Bank (ECB) Wednesday announced to offer EUR 530 billion liquidity for the longer-term refinancing operation (LTRO), reassuring market confidence somehow although this could impose some pressures on the euro zone balance sheet over the near term. In response, LME copper prices followed commodity markets to rise to as high as USD 8,700/mt in the early US and European trading session. However, Federal Reserve (Fed) Chairman Ben Bernanke later said following a continuous recovery in the US economic data that, the US economy would have to strengthen to ensure the unacceptably high unemployment rate keeps dropping. He didn't indicate more Fed bond buying, though, which dampened market bets the Fed would implement more stimulus measures such as QE3. The US dollar advanced considerably as a result, triggering a round of dives in commodity markets. Crude oil prices slipped, gold prices plunged by nearly 5%, and the euro closed down by more than 1%. US equity markets also closed with losses, while LME copper prices suffered profit-taking and plumped rapidly to a low of USD 8,405/mt. Nevertheless, LME copper prices narrowed losses gradually due to technical support, and finally settled at USD 8,525/mt, still a slight decline of USD 40/mt. The proportion of cancelled warrants to total LME copper inventories overnight continued to increase, up as high as 31.69%, which can prop up copper prices.
LME copper prices are well supported at daily moving averages from overnight price trends, while Comex copper prices also trended higher this morning. Besides, the euro needs to make corrections following sharp declines. A lack of actual buying support from Asian markets, however, will make LME copper upside room limited. As such, SMM anticipates LME copper prices will move between USD 8,470-8,600/mt during today's Asian trading session. Chinese stock markets will rally since markets are optimistic over China's latest PMI data to be released today. SHFE copper prices will track LME copper price movements, with support expected at the 5-day moving average, while SHFE 1205 copper contract prices will fluctuate in the RMB 60,300-61,300/mt range. Spot copper discounts are estimated between negative RMB 450-300/mt versus SHFE 1203 copper contract, owing to sluggish consumption and since hedged copper remains locked during the first trading day of March.