SMM Morning Review - 2012/4/16 Copper Market

SHANGHAI, Apr. 16 (SMM)–As the US and European markets continued to absorb China's weak GDP data for 1Q last Friday, LME copper prices extended the losing streak from Asian trading hours. Data later revealed that Spanish bank borrowing from the European Central Bank (ECB) hit a new record high of EUR 316.3 billion in March, nearly doubled from the previous month, while the cost of insuring Spanish 5-year bond closed above 500 basis points for the first time, stocking market fears that the borrowed money would be invested in domestic public bonds and causing the euro to dive along with European stock markets. Besides, the US in the evening announced its consumer confidence slid mildly in early April, so US equity markets also plunged with the falling financial markets, closing down by more than 1%. LME copper prices thus lowered to test USD 8,000/mt and touched as low as USD 7,964/mt before finally ending at USD 8,002/mt, a significant drop of nearly 2.5%, with bearish sentiment dominating the market.

LME copper prices slumped and trended lower towards USD 7,900/mt following the opening. However, Asian investors will make quotation pricing after Asian copper markets open. Moreover, the US dollar is unlikely to easily break resistance at 80 following continuous increases. As such, SMM believes LME copper prices will move between USD 7,900-8,000/mt during Monday's Asian trading hours, with limited pressures. The Shanghai Composite Index will struggle near the 60-day moving average. SHFE copper prices will drift lower to RMB 57,000/mt after opening down, while SHFE 1207 copper contract prices will fluctuate in the RMB 56,500-57,500/mt range. In spot markets, downstream producers will take a wait-and-see stance on the first trading day of the week and the last trading day for SHFE current-month copper contracts. Spot copper premiums are estimated between positive RMB 80-150/mt against SHFE current-month copper contracts.