SHANGHAI, Feb. 21 (SMM) – On Wednesday, the euro zone announced disappointing consumer confidence data and sent European stock markets closing down 0.3%. The US PPI and housing start data for January also came in softer than anticipated, which sparred market concerns over slowing copper demand. Furthermore, US equity markets trended lower following the opening as investors became less confident over economic growth outlook. Trading also remained cautious while markets awaited the Fed's minutes due later the day. All these factors caused LME copper to extend weakness. Later, the Fed released minutes for the monetary policy meeting held January 29-30, showing many members suggested adjusting the scale in USD 85 billion bond purchase program each month. A lot of the meeting participants expressed concerns over possible cost and risks brought by the additional asset purchase plan. Minutes indicated that the Fed would likely end QE3 even if the labor market does not improve significantly. In this context, the US dollar index stood above 81.00, but other currencies continued earlier declines and hit new intraday lows. US equity markets slipped across the board, with the Standard & Poor's 500 Index falling 1.24%, the largest one-day drop since February 4. New York crude oil plunged by 2.3%, and gold prices dipped to around USD 1,550/oz. LME copper thus gained the falling momentum and touched a low at USD 7,954/mt before closing at USD 7,964/mt, a loss of over 1%.
The euro still has the risk of falling. Hence, SMM believes that LME copper will drop further during Thursday's Asian trading hours, with prices between USD 7,920-8,020/mt. SHFE copper prices will start down before testing support at the 60-day moving average, and SHFE 1305 copper contract will hover in a range of RMB 57,500-58,300/mt. Shanghai spot copper discounts are estimated between RMB 200-300/mt versus SHFE 1303 copper contract.