SHANGHAI, Oct. 11 (SMM) – Favorable and unfavorable macro news was intertwined Wednesday. China's state-owned media reported large Chinese insurance companies increased their stock holdings by over RMB 10 billion (USD 1.6 billion) over the last three trading days, and would continue to support blue chip and stock markets. Another newspaper reported that China may initiate a new round of incentive policies to encourage vehicle purchases in rural areas. Investors awaited China's releases of trade data for September, GDP for 3Q, and industrial added value next week. Later, the Fed revealed the Biege Book saying that the US economy is still "expanding mildly". Nevertheless, Europe's banking crisis still worried some investors as Fitch warned that euro zone countries' credit ratings may suffer downgrades again. The IMF said if governments of euro zone member states cannot solve crisis, their banking industry could face risk of severe capital withdrawals, which sent the US and European stock markets back into declines again, with the Dow Jones Industry Average slipping by 0.95%, down for three consecutive days, and European stock markets closing down 0.6%. As such, LME copper prices continued to come under pressure in early trading session but won buying support at the USD 8,100/mt technical level, and pared daily losses at the tail of trading, the only metal that settled unchanged Wednesday.
Standard & Poor's (S&P) Thursday morning slashed the long-term credit rating for Spain from "BBB+" to "BBB-", just one notch above junk status, pointing to mounting risks to Spain's public finances. It placed a negative outlook, which means S&P may lower Spain's credit rating again in the future. Thus, LME copper prices fell immediately following the opening Thursday. SMM believes that LME copper prices will test support at USD 8,100/mt and move between USD 8,100-8,180/mt during Thursday's Asian trading session. The Shanghai Composite Index will continue to struggle around its 60-day moving average. SHFE copper prices will start down with resistance at RMB 59,000/mt, while SHFE 1301 copper contract will hover in the RMB 58,500-59,000/mt range. Bearish sentiment will grow in spot copper markets, and the price gap between high and standard-quality copper will continue to expand before SHFE 1210 copper contracts are delivered. Spot copper discounts are expected between negative RMB 20-150/mt versus SHFE 1210 copper contracts.