SMM Morning Review - 2012/6/11 Copper Market

SHANGHAI, Jun. 11 (SMM) – Last Friday, Germany's imports were reported to tumble at their fastest rate in two years in April and its exports also slipped more than anticipated, exacerbating market pessimism towards the European debt crisis. Later, Spain said that it would apply for the European Union (EU) to provide financial bailout for its troubled banking industry at the weekend, so investors predicted the global economy would continue to slow and that market demand prospects for the industrial metal would be gloomy over the near term. Besides, both the European Central Bank and US Federal Reserve failed to hint more stimulus actions in the near term. LME copper thus extended the losing streak and hit a fresh 2012 low at USD 7,233/mt in the session. Nevertheless, the US President Obama said at the tail of trading that European leaders should take measures to tackle their debt woes as soon as possible since it's of great importance to both European and US economies. This gave a glimmer of hope to investors that Europe's debt problems would be solved very soon, which led US equity markets to close higher. In consequence, LME copper pared some of the losses before finally ending at USD 7,299/mt, but market activity on the LME remained relatively quiescent. LME copper extended its losing streak to a sixth straight week last Friday, its longest such run in two years and is likely to become more sensitive to market news, especially news related to the European debt crisis. Investors should be wary of great copper price volatility ahead of the Greek election.

The EU has agreed to provide a loan of EUR 100 billion to the Spanish banking sector, helping the euro start higher and increase to nearly 1.27 this morning. LME copper surged by 2% accordingly immediately after the opening. However, China's CPI and PPI figures released Saturday will restrict copper to move higher. Hence, LME copper will move between USD 7,370-7,470/mt during Monday's Asian trading session. The Shanghai Composite Index will face great resistance at 2,300. SHFE copper will open higher but then probably trend lower after suffering selling at the highs. SHFE 1209 copper contract will fluctuate in the RMB 53,300-54,300/mt range. Spot copper premiums are estimated between positive RMB 250-320/mt versus SHFE 1206 copper contract.