SHANGHAI, May. 18 (SMM) – Market worries over the European debt crisis prevailed Thursday. The number of people in Greece supporting the left-wing party to reject austerity measures increased sharply, while the rumor was confirmed that the European Central Bank had stopped providing liquidity to some Greek banks which do not have the ability to pay their debts. Meanwhile, Spain sold EUR 2.49 billion of short-term government bonds, with the average yield rising considerably compared with the previous sales, which rekindled market fears over the euro zone debt crisis. In response, Fitch lowered Greece's credit rating to CCC, and Moody's also cut 16 Spanish banks. The euro thus trended down and helped the US dollar touch a high at 81.682, weighing on commodity markets. Later, the US announced that the Philadelphia Fed's manufacturing index slid by 5.8 in May to hit its lowest since last September, and that US leading indicators retreated by 0.1% in April, the first drop in the past 7 months. Disappointing US figures led US equity markets to fall significantly again, with the Dow Jones Industrial Average touching as low as 12,440. However, contrary to other commodities, gold prices surged by 2.25% for a safe-haven. LME copper prices moved lower in the early US and European trading session and pared daily gains, reaching a low at around USD 7,627/mt but finally ending at USD 7,669/mt, a slight increase of USD 19/mt, with noticeable resistance at the 5-day moving average.
Asian markets will continue to absorb negative news Thursday, so the euro will post weak performance further. However, technical indicators will help cap downside room for LME copper. As such, SMM believes LME copper prices will move between USD 7,620 -7,720/mt during Friday's Asian trading session, testing the previous two days' lows and suffering resistance at the 5-day moving average. Tight cash flows will ease as a cut in the Reserve Requirement Ratio comes into effect Friday, which will help Chinese stock markets move firmly around the 5-day moving average and therefore bolster SHFE copper somehow. SHFE copper prices will keep fluctuating after starting lower, and SHFE 1209 copper contract prices should lurch in the RMB 54,500-55,500/mt range. Spot copper premiums are estimated between positive RMB 150-250/mt versus SHFE 1206 copper contract.