SMM Morning Review - 2012/3/2 Copper Market

SHANGHAI, Mar. 2 (SMM) –The US and European markets continued to absorb upbeat PMI data from China Thursday, which boosted risk appetites in the market. Crude oil, gold and other commodity prices surged as a result. LME copper prices also rallied from lows, and continued to trend higher after breaking the resistance at USD 8,500/mt. Later the day, the US announced its February manufacturing data cooled unexpectedly, and that consumer spending stayed flat in January for a third consecutive month. Nevertheless, the US initial jobless claims slid to a 4-year low last week, still lifting US equity markets which closed with gains. LME copper prices therefore advanced above USD 8,600/mt, with an intraday high reaching USD 8,647/mt. Finally, LME copper prices ended the day at USD 8,628/mt, an increase of more than 1.2%, and paring some of the previous day's losses. Trading volumes for LME copper, though, were limited during the first trading day of March, indicating cautious sentiment in the market.

Euro zone finance ministers approved the European Financial Stability Facility (EFSF) to provide financing for Greek bond swap, the first step to issue the second EUR 130 billion bailout fund. Besides, authoritative institutions have confirmed Greek bond transactions do not easily trigger credit default swap (CDS) breach. These can provide good support for LME copper price trends. However, markets will keep cautious ahead of the release of non-farm payrolls Friday evening. As such, SMM believes LME copper prices should move between USD 8,550 -8,650/mt during Friday's Asian trading session, with high prices similar with the prior day. Chinese stock prices will open higher and then struggle near the 5-day moving average. SHFE copper prices will keep fluctuating after a high open, and will test the resistance at RMB 61,000/mt, while SHFE 1205 copper contract prices will lurch in the RMB 60,500-61,300/mt range. Spot copper discounts are estimated between negative RMB 350-200/mt versus SHFE current-month copper contract.