SHANGHAI, Feb. 5 (SMM) –Spain's opposition Socialist Party called for the resignation of Spanish Prime Minister Mariano Rajoy over a corruption scandal, and the approval rating of the ruling People's Party dropped to a record low. At the same time, the latest Italian poll revealed that the approval rating of Prime Minister Silvio Berlusconi is increasing, adding uncertainty in the country's election. Political uncertainty in these two countries heightened market worries over the euro zone's economic growth and stability and also pushed Italian and Spanish borrowing cost higher. European stock markets closed 1.5% down and saw the largest intraday decline since earlier 2013. Stoxx Europe 600 index fell 1.5% to a fresh low since earlier this year, and Italian FTSE MIB index tumbled 4.5%. Spain's IBEX 35 index shed 3.8%, while Germany's DAX 30 index slid 2.5% and staged the biggest daily loss since July 2012. The euro fell appreciably as caution returned to markets, but the US dollar index rebounded by 0.5%, weighing on commodity markets. The US Commerce Department announced in the evening that factory orders increased by 1.8% MoM in December, softer than the expected 2.4%. In response, US equity markets closed down by 1% and surrendered almost all the gains registered last Friday. Crude oil prices also retreated by 1.6% after Iran said it may consider conducting direct dialogues on nuclear program suggested by the US. As a result, LME copper prices dipped but stopped falling after testing USD 8,266/mt, with settlement price at USD 8,287/mt, down slightly by USD 23/mt. In other news, the proportion of cancelled warrants to total LME copper stocks slipped below 9%, a signal the fundamentals side remains sluggish.
Due to political factor in Italy, the euro suffers the risk of falling. LME copper prices will fluctuate in a narrow range between USD 8,260-8,320/mt during Tuesday's Asian trading session. Chinese stock markets will extend increases. SHFE copper prices will keep fluctuating near current levels after starting slightly down, and SHFE 1305 copper contract will hover in the RMB 59,700-60,300/mt range. Shanghai spot copper discounts are estimated between RMB 180-280/mt versus SHFE 1302 copper contract.