SMM Morning Review - 2012/5/25 Copper Market

SHANGHAI, May 25 (SMM) – Negative and positive macroeconomic figures were intertwined on Thursday. HSBC announced the flash China manufacturing PMI for May remained sluggish, and that export orders in the same month also hit a fresh two-month low. PMI data in other countries was also disappointing. Germany's PMI fell at the fastest pace in May in the past three years, and its Business Climate Index also fell in this month for the first time in seven months. The euro zone's private sector contracted further in May as new orders sunk, forcing firms to cut backlogs and slash workforces. The US manufacturing PMI also retreated in May, which was partly due to the fact that economic slowdown in Europe and China hurt exports. Besides, the US durable goods orders for April rose less than expected as companies scaled back plans to add machinery. The US dollar index thus climbed to a 20-month high of 82.376. Nevertheless, the European Financial Stability Facility (EFSF) said it would continued to provide support for Greece, alleviating weak markets somehow, and leading US equity markets to swing between gains and losses. Crude oil and gold prices stabilized, and investors stuck to the sidelines ahead of Greek election while observing new progress in Europe. In this context, LME copper continued to lurch, meeting resistance at the 5-day moving average of USD 7,631/mt before finalizing at USD 7,565/mt, a slight gain of USD 6/mt. In other news, the proportion of canceled warrants to total LME copper stocks slid to 11.58% as selling pressures existed, a signal copper prices will remain weak over the near term.  

The euro will fluctuate feebly owing to the euro zone's poor PMI data. Owing to a lack of substantive buying support, LME copper cannot easily break resistance at the 5-day moving average, despite temporary support at around USD 7,550/mt. As such, SMM believes LME copper prices will mainly fluctuate narrowly between USD 7,540-7,640/mt during Friday's Asian trading session. The Shanghai Composite Index will struggle around the 5-day moving average. SHFE copper should hover around the previous day's settlement price of RMB 54,900/mt, and SHFE 1209 copper contract will lurch in the RMB 54,500-55,200/mt range. Spot copper premiums are expected to edge up to positive RMB 280-350/mt versus SHFE 1206 copper contract.