SMM Morning Review - 2012/6/28 Copper Market

SHANGHAI, Jun. 28 (SMM) – German Chancellor Angela Merkel sternly rejected the idea of so called euro bonds Wednesday, which dampened market expectation the EU summit would yield some measures to solve the European debt crisis. The euro thus expanded losses amid steeply falling risk appetites, while LME copper continued to come under pressure during the early US and European trading hours. Later, the US announced its durable goods orders rose by 1.1% in May, higher than the estimated 0.4%, and that the pending home sales index hit a fresh two-year high in the same month. The upbeat US economic figures temporarily alleviated market worries over global macroeconomy and helped US equity markets close up by nearly 1%. In consequence, LME copper moved higher rapidly and broke resistance at USD 7,400/mt before closing at a recent high of USD 7,420/mt, a gain of USD 60/mt. Spot copper premiums in London surged to USD 21/mt Wednesday, and the proportion of cancelled warrants to total LME copper stocks remained stable. 

The EU summit will be held Thursday, and investors are skeptical that a solution to the euro zone debt crisis can be reached, which should keep the euro fluctuating weakly further during the day. As such, SMM anticipates LME copper will move narrowly among recent moving averages, with prices expected between USD 7,360-7,440/mt during Thursday's Asian trading hours. Chinese stock markets will stabilize. Hence, SHFE copper prices will start higher and then may continue to move higher, with SHFE 1210 copper contract hovering in the RMB 53,800-54,500/mt range. Spot copper premiums are estimated to slip further to positive RMB 20-100/mt versus SHFE 1207 copper contract.