SHANGHAI, Jun. 12 (SMM) – On Monday, Italy announced its GDP continued to contract in 1Q, overshadowing the European prospects again. Later, both Goldman Sachs and Societe Generale cut their 2012 price forecasts for a range of base metals, pointing to risks brought by the European debt crisis. This made investors more worried that Spain may have to shoulder more debts after gaining rescue fund from the euro zone. Combined with the approach of the Greek election, investors chose to cut euro positions on a large scale, helping the US dollar index reverse its weakness in Asian trading session and find support at three recent moving averages again before climbing to 82.726. US equity markets, though, tumbled amid growing risk aversion, completely giving up last Friday's gains. LME copper thus drifted lower during Monday's US and European trading session as buying support was sluggish, narrowing daily gains and sliding to as low as USD 7,380/mt before finally ending at USD 7,408/mt. In other news, LME copper stocks increased by 5,525 mt Monday, and spot copper offers in London turned into discounts of USD 12/mt. However, the proportion of canceled warrants to total LME copper stocks increased for the first time in recent days on Monday, up to 10.43%. Copper prices are facing more risks as turmoil prevails.
While markets are worried that the euro zone's bailout fund could worsen Spain's financial situation, credit ratings agencies may cut the country's credit rating again. Risk aversion will cause the euro to fall during the day. LME copper therefore will move between USD 7,300-7,400/mt during Tuesday's Asian trading session. The Shanghai Composite Index will move below 2,300. SHFE copper will open down and fall further as shorts are likely to enter markets again, with new resistance expected at RMB 54,000/mt. SHFE 1209 copper contract will fluctuate in the RMB 53,200-54,000/mt range. Spot copper premiums are estimated between positive RMB 150-250/mt versus SHFE 1206 copper contract.