SHANGHAI, Jun. 19 (SMM) – Spain's 10-year government bond yields rose by 35 basis points to 7.22% on Monday, while Spain's credit default swap (CDS) climbed by 21 basis points to 620. Besides, Citibank said the possibility of Greece exiting the Euro zone was still between 50% and 75%, triggering market doubts about Greece's ability to form the coalition government. In response, the euro fell sharply by over 0.5% and retreated below 1.26 anew, as markets gradually shifted their focus on the Spanish debt crisis and its banking problems, and as an initial wave of buying from Sunday's victory for pro-bailout parties in Greece abated gradually. Most investors opted to lock in profits from an overnight rally and left markets, pushing LME copper down all the way. As a result, LME copper sank from its earlier 3-week high and completely gave up the daily gains before sliding to as low as USD 7,456/mt. However, LME copper recouped some of the losses after winning support at the 5-day moving average, and finally ended at USD 7,510/mt, still a drop of USD 50/mt. Nevertheless, it was worth noticing that the latest data released by the Commodity Futures Trading Commission (CFTC) showed funds managers still extended their bearish copper bets, with short positions registering the largest since March 2009. In this context, investors should be wary of uncertainty in the European debt crisis and turmoil ignited by the US disappointing economic data.
Markets have gradually returned to rational levels following the Greek election and begun doubting about the country's capability to establish a coalition government. Furthermore, while the financing cost in Spain and Italy increased steeply, there is no positive result from the G20 meeting. Investor cautious sentiment thus is dominating markets and will impose great pressures on the euro during the day. This will somehow weigh on LME copper prices, which are expected to move between USD 7,450-7,550/mt during Tuesday's Asian trading session. The Shanghai Composite Index will continue to struggle at 2,300. SHFE copper will open down and then fluctuate weakly, while SHFE 1209 copper contract prices will hover in the RMB 54,500 -55,200/mt range. Spot copper premiums are estimated between positive RMB 150-250/mt versus SHFE 1207 copper contract.