SMM Copper Market Morning Review (2012/10/10)

SHANGHAI, Oct. 10 (SMM) – Rio Tinto cut China's growth forecast Tuesday and said it was stepping up efforts in slashing production costs, while negative news from the macro front also hit markets. The IMF said the global economic slowdown is worsening following its cut in global growth forecasts for the second time since April this year, and warned US and European policymakers who fail to fix their economic problems would prolong the slump. Meanwhile, the IMF announced some euro zone countries including France and Spain would not be able to achieve financial deficit targets for next year as austerity measures are unfavorable for economic growth prospects, and said that if Greece cannot give a plan of stabilizing debts, it may stop financial aids for the country. Moreover, market worries existed that Spain would remain unwilling to apply for rescue. In this context, the US dollar was favored and broke through 80, offsetting the impact of the PBOC's reverse repurchases on markets. As the IMF issued pessimistic statements on economic growth, investors chose to keep cautious ahead of financial results for the third quarter. US equity markets thus moved significantly lower with the Dow Jones Industrial Average closing down 0.81%, the largest decline in six weeks. As a consequence, LME copper prices lost gains registered in early trading session and returned to around the previous trading day's lows, retreating to USD 8,139/mt before finally ending USD 18/mt down at USD 8,162/mt. In other news, London spot copper offers turned to discounts of negative USD 4/mt Tuesday.

The euro will remain weak, while negative comments from the IMF will continue to depress markets. Therefore, LME copper prices will drift down to USD 8,100-8,200/mt during Wednesday's Asian trading session. Chinese A-shares will meet resistance at the 60-day moving average after starting down. SHFE copper prices will also open down and then fluctuate feebly, while SHFE 1301 copper contract will move in the RMB 58,300-59,100/mt range. Spot copper discounts are estimated between negative RMB 0-100/mt versus SHFE 1210 copper contract.