SMM Morning Review - 2012/4/11 Copper Market

SHANGHAI, Apr. 11 (SMM)–The US and European markets continued to absorb sluggish Chinese import and export data Tuesday, which heightened market pessimism towards the country's demand for the red metal. Therefore, US equity markets plunged immediately after the opening, and European stock markets also negatively responded to the disappointing US nonfarm payrolls last Friday during the fist trading day following the Easter holiday. Later, Italian and Spanish bond yields climbed further, reigniting market fears over the European debt crisis. Italian stock markets plummeted by 5%, while Spanish stock markets fell to a three-year low, both of which helped push commodity markets significantly down. Crude oil prices in the US slid to USD 101.02 per barrel along with the rising risk aversion, while gold prices closed with a gain of 1%. The US dollar moved higher due to safe-havens. Dragged down by the unfavorable macro environment, LME copper prices dived at the tail of trading and dropped to as low as USD 8,050/mt before finally ending at USD 8,080/mt, a noticeable decline of 3.5%, and taking a lead in drops on the base metals market. It was worth noticing that LME copper inventories were again reported Tuesday to increase significantly, one of the reasons that dampened LME copper prices which have a growing risk of retreating over the near term.

LME copper urgently need a round of corrections Wednesday following the prior day's slumps and are likely to edge higher plus increasing bargain hunting from Asian investors, with prices expected to move between USD 8,050-8,220/mt during Wednesday's Asian trading session. The Shanghai Composite Index will come under pressure at 2,300. SHFE copper prices will open significantly lower and entice large buying, but any downside room is limited, while SHFE 1207 copper contract prices will fluctuate in the RMB 57,800-58,800/mt range. Spot copper premiums are estimated between positive RMB 50-120/mt versus SHFE 1204 copper contracts.