SHANGHAI, Feb. 25 (SMM) – German IFO Business Climate Index was reported to increase significantly on February 22 and helped European stock markets close 1.3% higher. Markets, though, still focused on the Italian election on February 24. Fed chairman Ben Bernanke said asset bubble or inflation was exaggerated, which dispelled market worries over the Fed's minutes. Meanwhile, Hewlett-Packard Company reported favorable earnings and caused the Dow Jones Industrial Average to recoup 14,000. Nevertheless, the European Commission predicted that the euro zone's economy will contract by 0.3% in 2013, in strong contrast with earlier estimate of an increase of 0.1%. Besides, European banks will only repay less than half the expected amount of the second LTRO loan, depressing demand outlook for the red metal. The euro slipped rapidly, but the US dollar settled slightly up, weighing on commodity markets. Furthermore, Moody's lowered the UK's domestic and foreign-currency government bond ratings by one notch because of a weak growth outlook and the country's rising debt burden. As a consequence, LME copper surrendered all gains registered in the Asian trading session, and tested support at a low of USD 7,796/mt before closing at USD 7,817/mt, a loss of USD 35/mt and down for five consecutive days. However, cancelled warrants increased by 3.3% to 27,775 mt, the highest since February 6.
Investors are upbeat about HSBC China PMI to be released on Monday. LME copper also has the need for corrections and thus may stop falling during Monday's Asian trading session, with prices expected between USD 7,780-7,880/mt. SHFE copper prices will likely increase after starting down slightly, but still experience a losing streak during the day. SHFE 1305 copper contract will hover in a range of RMB 56,500-57,500/mt. Shanghai spot copper discounts are estimated between RMB 120-250/mt versus SHFE 1303 copper contract.