SMM Copper Market Morning Review (2013-1-29)

SHANGHAI, Jan. 29 (SMM) – The macro news front was comparatively quiet Monday. Caterpillar (CAT) reported its 4Q earnings fell by 55%, while Toyota Motor (TM) said it sold a record 9.75 million vehicles in 2012. The US in the evening released mixed economic figures with the durable goods orders seeing a 4.6% MoM increase in December, well above 2% expected by economists surveyed by the Dow Jones. The National Association of Realtors reported its Pending Home Sales Index, based on contracts signed last month, dropped 4.3% to 101.7 in December, in strong contrast with an increase of 1.0% anticipated by markets. Thus, US equity markets swung between gains and losses, with the Standard & Poor's 500 Index falling 0.18% and ending the winning streak for 8 consecutive days. Strong US durable goods data did lend some support to base metals, which, however, quickly surrendered gains following the announcement of softer-than-expected US home data. LME copper also dipped to test USD 8,017/mt after rising to a high of USD 8,086/mt, but still up USD 7/mt. In other news, crude oil prices returned above USD 96/bbl in the face of growing tension in the Middle East, which should guide future copper price trend. In addition, hedge funds and money managers increased the size of their net longs in commodities to the highest in the past six months. 

Market activity should remain relatively quiet while investors await China's manufacturing data due Friday and US non-farm payroll report for January. Nevertheless, the US dollar retreated Tuesday morning. This, combined with encouraging US data Monday, will help LME copper rebound slightly, with prices expected between USD 8,040-8,100/mt during Tuesday's Asian trading session. Chinese stock markets will extend increases and help SHFE copper prices drift higher by around RMB 100/mt. SHFE 1305 copper contract will hover in the RMB 58,500-58,900/mt range. Shanghai spot copper discounts are estimated between RMB 100-200/mt against SHFE 1302 copper contract.