SHANGHAI, Jul. 23 (SMM) – Last Friday, China again became one of the major factors affecting movements in the financial market. Xinhua News Agency cited a notice issued by China's Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development that, China will not relax property controls and ordered local governments that have relaxed housing policies to strictly implement them. The state-run news agency also reported that China will not cancel home purchase restrictions either, casting shadow over demand prospects of the world's largest red metal consumer over the near term, which added to negative market tone. Although the euro zone has approved the bailout for Spain's banking industry, heavily indebted Valencia region in Spain asked for further government rescue last Friday evening, which heightened market concerns that the Spanish government was close to an all-round bailout. Coupled with the fact the European Central Bank later said it was halting the use of Greek bonds as collateral, market risk aversion was growing and caused US equity markets to close 1% down. The US dollar was favored as a safe-haven amid increasing investor worries over Chinese copper demand as well as the health of the European economy, and sent the euro plunging to a two-year low, which pushed commodity markets down. In consequence, LME copper extended Asian trading session's losses and slipped all the way, dropped to as low as USD 7,530/mt before finally ending at USD 7,572/mt, the biggest one-day decline in one month.
Spain's economic growth suffered a downgrade while credit rating agency Egan-Jones again lowered the country's credit rating to junk status. Besides, Italy's bond yields have soared above 6%. In this context, the euro will fluctuate weakly. Hence, SMM believes LME copper will be capped around the 30-day moving average with prices expected between USD 7,520-7600/mt during Monday's Asian trading session. Chinese stock markets will start down and come under pressure. SHFE copper prices will also open down and meet a new resistance level at RMB 55,500/mt, while SHFE 1211 copper contract will hover in the RMB 54,800-55,500/mt range. Spot copper offers are estimated between premiums of positive RMB 50-150/mt versus SHFE 1208 copper contract.