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SMM Morning Review - 2012/5/9 Copper Market
May 9,2012 09:44CST
smm insight
LME copper will move between USD 8,050 -8,150/mt during Wednesday's Asian trading session, SHFE 1208 copper contract prices will lurch in the RMB 56,800-57,500/mt range.

SHANGHAI, May. 9 (SMM) – LME copper price movements were weighed down in Tuesday's early US and European trading session, as markets continued to absorb the weak US non-farm payrolls released on last Friday after the LME resumed trading following a one-day holiday. Later, Greece's leftwing leader Tsipras said Greece's bailout agreement with EU and IMF became invalid after voters rejected the pro-bailout parties in Sunday's vote. This meant that Greece's hard-fought bailout deal could fail. This, when combined with the fact Germany's bond yields hit a historical low, caused market fears to grow. In response, the euro fell for 7 trading days in a row, while the US dollar rose noticeably on risk aversion. Political uncertainties in Europe also spread to financial markets, sending gold and crude oil prices down by nearly 2% and about 1%, respectively. US equity markets also retreated to a 2-month low. Against these backdrops, LME copper prices slid to as low as USD 8,051/mt after falling below all moving averages, and finally ended at USD 8,100/mt, a loss of nearly USD 100/mt. In other news, the proportion of canceled warrants to total LME copper stocks continued to fall on Tuesday, down to 29.7%, which will have less support for copper prices, although long investor activity has not been over.

Uncertainties in Greece's election added more instabilities to the country's political situation, while a ECB official mentioned that Greece may leave the euro zone during an interview, which will drag the euro down. However, the US dollar is facing technical resistance at 80, and LME copper prices have already touched lows from technical indicators, both of which will cap price downside room. As such, SMM believes LME copper will move narrowly around USD 8,100/mt during Wednesday's Asian trading session, with prices expected between USD 8,050 -8,150/mt. Chinese stock markets will fluctuate around the 5-day moving average. SHFE copper prices will meet the daily pressure at RMB 57,500/mt after starting lower, while SHFE 1208 copper contract prices will lurch in the RMB 56,800-57,500/mt range. Spot copper premiums are estimated between positive RMB 50-100/mt versus SHFE 1205 copper contract.   

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