SMM Copper Market Morning Review (2012-10-26)

SHANGHAI, Oct. 26 (SMM) –The US reported in Thursday's early trading session that durable goods orders rose 9.9% MoM to USD 218.2 billion in September, well above the expected 7.1% and up for the fourth time in five months, and also posted the largest monthly increase since January 2010. The drop of 13.2% for August's US durable goods orders was revised to 13.1%. The US pending home sales index increased 0.3% MoM to 99.5 in September, lower than market estimates of 2.1%, but up 14.5% YoY. The US initial jobless claims were 369,000 last week, significantly lower than market anticipation of 371,000, an indication that the US jobs market is still recovering.Positive data helped copper markets stop falling and begin stabilizing, with prices holding firm at USD 7,850/mt.However, markets were depressed again following rumor that Fitch would lower credit rating for the US. Coupled with the fact that the US dollar broke through the resistance at 80, LME copper prices followed the financial market to lose USD 7,800/mt before dipping to USD 7,788/mt. But as Fitch denied the rumor and said it would not evaluate credit rating for the US before the end of 2013, LME copper prices pared some of earlier losses at the tail of trading and finally ended at USD 7,825/mt, a drop of USD 36/mt.LME copper prices found weak support at around USD 7,850/mt again after falling, so investors should be cautious that copper prices may lower to search support over the near term.

The latest news Friday morning reported that Greek political leaders failed to reach consensus on extending two years to meet deficit target, while Standard & Poor's cut credit rating for BNP Paribas and placed other 10 French banks a negative outlook. In this context, the euro is likely to move lower. Hence, LME copper prices will move weakly between USD 7,800-7,880/mt during Friday's Asian trading session. The Shanghai Composite Index will continue testing support at 2,100. SHFE copper prices will start down, and SHFE 1302 copper contract will hover in the RMB 56,500-57,300/mt range. As spot copper cargo-holders become eager to move goods at the month's end, copper discounts will likely expand to negative RMB 180-300/mt versus SHFE 1211 copper contract.