SMM Morning Review - 2012/5/30 Copper Market

SHANGHAI, May 30 (SMM) – On Tuesday, markets continued to absorb the positive news that an opinion poll suggested more Greek people hoped Greece to stay in the euro zone. Besides, investors anticipate the world would take more stimulative measures, which helped US equity markets close with a strong gain of over 1%. In response, LME copper extended Asian trading session’s fluctuating range of USD 7,680-7,760/mt in early US and European trading session. Nevertheless, credit rating agency Egan-Jones lowered the credit rating for Spain, heightening market worries over Spanish bank problems and sending Spanish stock markets down significantly by 2.3%. The euro thus slid to a two-year low of 1.2462, while god and crude oil prices also retreated. Furthermore, the US announced at the tail of trading that the US consumer confidence slipped unexpectedly to a four-month low since consumers became more pessimism towards the job market and economic prospects. Meanwhile, the Dallas Fed Manufacturing Index also came in weaker than the previous data and continued to contract in May. As a result, LME copper surrendered some of early gains, sank to USD 7,647/mt, and finally settled at USD 7,657/mt, a loss of USD 19/mt, and also down for the first time in four trading sessions. In other news, LME copper stocks were reported to rise sharply by 2,750 mt on Tuesday, while spot copper premiums in London slid to USD 9/mt. The volume of canceled warrants was also on a downside track, a potential risk for copper prices over the near term.

There was news this morning that the European Central Bank has rejected the EUR 19 billion recapitalization plan by Bankis, and the governor of Spain's central bank resigned one month ahead of the schedule. Greek crisis prevails. In this context, the euro will remain weak. As such, SMM holds the view LME copper will drift lower, with prices expected between USD 7,640-7,710 during Wednesday’s Asian trading session. Chinese stock markets will meet resistance at the 20-day moving average. SHFE copper will suffer pressure at RMB 56,000/mt, and SHFE 1209 copper contract will hover in the RMB 55,400-56,000/mt. Spot copper premiums are estimated between positive RMB 120-200/mt versus SHFE 1206 copper contract.