SMM Morning Review - 2012/3/7 Copper Market

SHANGHAI, Mar. 7 (SMM) –The euro zone GDP slid in 4Q 2011 as markets expected Tuesday, but the European Central Bank's (ECB) balance sheet was reported to have exceeded EUR 3 trillion. Greece's government officials denied the delay of bond swap deadline while investors who agreed to participate in the bond swap just held 20% of the total bonds needed, meaning that the chance of a Greek selective default was increasing rapidly. Investors thus were commonly worried about Greece's ability to finish the debt restructuring before the final deadline, which boosted risk aversion in commodity markets and caused the euro to slump by 1%. Both gold and crude oil prices plunged by nearly 2%, while global stock markets also registered the biggest decline in nearly three months. In particular, the Dow Jones Industrial Average fell by more than 200 points to record the biggest one-day loss since early 2012. LME copper prices therefore slipped to USD 8,221/mt after losing USD 8,400/mt and USD 8,300/mt, and finally settled at USD 8,244/mt, down nearly 3%, with low-end support at only the 60-day moving average.

As the deadline of Greece's debt restructuring nears, markets become more worried, and the situation in Spain is also pessimistic. The euro will extend losses as a result, dragging down LME copper prices, which will move between USD 8,190-8,300/mt during Wednesday's Asian trading session. Chinese stock markets are expected to open lower. SHFE copper prices will open down by nearly RMB 1,000/mt, but profit-taking by short investors will cap downside room, with resistance estimated at RMB 60,000/mt, while SHFE 1206 copper contract prices will fluctuate in the RMB 58,500-59,500/mt band. Spot copper discounts are projected to be negative RMB 100-0/mt versus SHFE 1203 copper contract.