SMM Morning Review - 2012/3/9 Copper Market

SHANGHAI, Mar. 9 (SMM) –Except for private creditors, major banks and pension funds in Greece all agreed on the debt swap deal Thursday, and the European Central Bank (ECB) Governing Council in the evening announced to accept Greek government bond as collateral again, which boosted market confidence over a successful result from Greek debt swap. The euro therefore surged, but the US dollar lowered to test 79, providing support for commodity markets. LME copper prices thus challenged resistance at the 5-day moving average in the early trading session, and touched a high at USD 8,434/mt. Later, the ECB announced to keep its benchmark interest rate unchanged, but further cut growth forecast for 2012 and raised expectations on inflation rate for 2012 and 2013. The US initial jobless clams, however, were reported to rise unexpectedly last week, forcing US equity markets to narrow previous gains at the tail of trading. LME copper prices thus fell slightly, and finally ended at USD 8,336/mt, still a slight increase of USD 53/mt, while waiting for further guidance from Chinese economic data. 

Favorable factors outweigh unfavorable ones today. Markets expect China's CPI growth will fall to around 3%, and reports this morning revealed that the participation rate of Greek debt swap has reached between 85%-90% and can reach 95% if the country starts collective action clauses (CAC). This means Greece has an increasing chance to pass the swap deal, which will improve market sentiments. As such, LME copper will rebound marginally, but due to prevailing resistance, any upside room will be limited, with prices estimated between USD 8,300-8,420/mt during today's Asian trading session. Chinese stock markets will keep strong after a high open. SHFE copper prices will drift higher and try to stabilize, while SHFE 1206 copper contract prices will fluctuate in the RMB 59,200-60,200/mt band. Spot copper offers are expected to be between discounts of negative RMB 50/mt and premiums of positive RMB 50/mt against SHFE 1203 copper contract.