SMM Morning Review - 2012/6/14 Copper Market

SHANGHAI, Jun. 14 (SMM) – The financial market remained relatively quiet on Wednesday. The US announced its retail sales slid for the second month in May, and that the wholesale price dropped by the most in recent 3 years, which caused US equity markets to close down. However, the US PPI data revealed that the US inflationary pressures eased some and heightened investor anticipation over the implementation of QE3 measures. The US dollar index thus lowered and tested 82. Besides, investors chose to close short positions for the euro on a large scale on increasing expectations that Greece may explore ways to revise its austerity plan following the June 17 election. In this context, the euro trended higher for two consecutive days. LME copper therefore was initially sent down to USD 7,360/mt by the disappointing US economic figures but erased some of the previous losses at the tail of trading owing to short covering, with prices finally ending at USD 7,376/mt. Market activity on the LME remained lackluster, however, as copper prices lacked directions ahead of the weekend's Greek election and Italy's bond auction. In other news, LME copper stocks increased sharply by 3,875 mt on Wednesday, up for three trading days in a row.   

Moody's slashed Spain's credit rating by three notches and placed in the negative watch list immediately after US equity markets were closed Wednesday. This means Moody's will likely cut Spain further in the future. Furthermore, Italian government bond yields continued to increase appreciably Wednesday, and there was news that Greek bank deposits are falling faster. These factors will depress the euro's movements Thursday. As such, SMM believes LME copper will drift down and move narrowly between USD 7,340 -7,400/mt during Thursday's Asian trading session. The Shanghai Composite Index will fall to 2,300. SHFE copper will start slightly down and then fluctuate, with SHFE 1209 copper contract expected between RMB 53,500-54,000/mt. Spot copper premiums will slide to positive RMB 50-150/mt versus SHFE 1206 copper contract.