SHANGHAI, Jul. 16 (SMM) – Last Friday, Moody's slashed its outlook for the base metals industry from stable to negative, pointing to slow growth in the world's largest economies. However, success in Italian government bond auction alleviated investors somehow after Moody's earlier cut its credit rating from A3 to Baa while warning a further downgrade, which caused the euro to rebound from a two-year low and helped drive up copper prices. Besides, China's mildly increased retail sales data and industrial growth still gave a boost to future copper demand, leading US equity markets to rebound strongly following six-session losses. Coupled with a wave of aggressive short covering, LME copper expanded daily gains, touched the 60-day moving average of USD 7,730/mt after breaking through USD 7,700/mt, and finally ended USD 165/mt higher at USD 7,715/mt. In other news, the proportion of canceled warrants to total LME copper stood at a high of 20.89%, while spot copper premiums in London were USD 10/mt. Nevertheless, despite considerable rebounds in major financial markets last Friday, trading volumes for US equity markets fell appreciably, meaning that last Friday's round of increases were actually technical corrections. LME copper prices were still within previous fluctuating range, so investors should be wary of rapid declines following last Friday's rises.
LME copper lacks buying support despite last Friday's noticeable surges and thus suffers great resistance at the 60-day moving average. In this context, SMM believes that LME copper will move between USD 7,630-7,730/mt during Monday's Asian trading hours. The Shanghai Composite Index will meet pressure at the 10-day moving average. SHFE copper prices will fluctuate around RMB 56,000/mt after starting higher, and SHFE 1210 copper contract will lurch in the RMB 55,700-56,300/mt band. In spot markets, Monday is the last trading day for SHFE 1207 copper contract, and cargo-holders of high-quality copper will try to hold on premiums. Mainstream spot copper offers are estimated between discounts of negative RMB 50/mt and premiums of positive RMB 80/mt.