SMM Morning Review - 2012/7/19 Copper Market

SHANGHAI, Jul. 19 (SMM) – During early US and European trading session Wednesday, LME copper extended Asian trading session's declines, looking for support at lower price levels and testing a low at USD 7,581/mt. Federal Reserve (Fed) Chairman Ben Bernanke reiterated concerns over economic slowdown when testifying to the House Financial Services Committee, but again did not hint the Fed would introduce new stimulative measures very soon, as a double dip recession is unlikely to occur at present and economy would continue to increase moderately. Fed's Biege Book later also revealed the US economic growth is from “mild to stable”. Meanwhile, the US Commerce Department announced housing starts rose by YoY in June, well above market expectation of 5.2%, and also the highest since October 2008. In response, US equity markets surged greatly and helped LME copper rally from earlier lows, up above USD 7,600/mt. Nevertheless, it was reported that German Chancellor Angela Merkel stressed her promises to Europe when accepting interviews but cannot assure all results would be positive since Europe's plan has yet to be formed. This stirred investor worries and sent the euro falling, keeping LME copper price trend at the tail of trading in check. Giving some of daily gains, LME copper finally settled at USD 7,642/mt, still a slight increase of USD 14/mt. Market activity on the LME has become gradually lackluster as a lot of market insiders leaves markets for holidays, and open interest is the lowest since July 2009, highlighting market insiders' divergence over future copper price movement.

Markets clearly lack guidance from and macroeconomic front, which will cause the euro to fluctuate cautiously. In this context, LME copper will lurch around the opening price, with prices expected between USD 7,600-7,680/mt during Thursday's Asian trading session. Chinese stock markets will edge down after starting higher. SHFE copper prices will open flat and then fluctuate virtually in the previous session's range, while SHFE 1210 copper contract will hover in the RMB 55,500-56,000/mt band. Spot copper offers are estimated between premiums of positive RMB 20-120/mt versus SHFE 1208 copper contract.