SMM Morning Review - 2012/6/13 Copper Market

SHANGHAI, Jun. 13 (SMM) – On Tuesday, Spain's 10-year bond yields soared to historical levels, while Fitch slashed long-term credit ratings of 18 Spanish banks and predicted that Spain's Prime Minister cannot meet the budget deficit cut target. But, a steep drop in Spanish and Italian government bond prices raised market speculation that countries in the world would introduce stimulus measures to boost the economy. This, though, reignited market worries over the spread of the euro zone debt crisis and that industrial metals demand was weakening further. In the face of risk aversion, gold prices surged by over 1%. On the other hand, Federal Reserve Bank of Chicago President Charles Evans reiterated when accepting Bloomberg's television interviews that the Federal Reserve Board would implement additional monetary stimulus measures. He said these measures would help cut the unemployment rate more quickly, which led US equity markets to close significantly higher and pared the previous trading day's losses. Mixed market news kept investors on their toes ahead of the Greek election, resulting in lackluster market activity on the LME. LME copper thus fluctuated around USD 7,400/mt during the US and European trading session and finally ended at USD 7,402/mt, a slight decline of USD 6/mt. LME copper stocks increased by 4,350 mt on the same day, which is likely to restrict copper price trends.    

The European Central Bank stressed again the euro zone needs to create a banking union. Coupled with recent relatively weakness in the US dollar index, the euro will probably move higher Wednesday and therefore lift copper. Nevertheless, markets shall keep cautious in advance of the Greek election. Without buying support, LME copper will face an uneven road to trend higher and move between USD 7,390-7,470/mt during Wednesday's Asian trading session. The Shanghai Composite Index will struggle around 2,300. SHFE copper will start higher and then fluctuate, while SHFE 1209 copper contract will hover in the RMB 53,900-54,600/mt range. Spot copper premiums are estimated between positive RMB 120-200/mt versus SHFE 1206 copper contract.