SHANGHAI, Feb. 27 (SMM) – Deadlock in Italian election plagued the financial market on Tuesday, as the center-left coalition led by Pier Luigi Bersani was in the lead for the lower house, but neither left nor right had a majority in the upper house. Market worries over instability in Italy even in the whole euro zone were escalating, causing EUR 8.75 billion Italian short-term bond yields to hit a four-month high. Italian stock markets plunged by 5% following the Italian election outcome, and European stock markets slipped 1.3%. In this context, commodity markets were weighed down. 

However, the US later announced strong consumer confidence and new home sales data, which pushed US equity markets higher. US new home sales rose 15.6% MoM in January and saw the biggest one-month increase in recent 20 years, up to the highest level since mid-2008. Meanwhile, the Conference Board's consumer confidence index for February surged to 69.6 from the previous reading of 58.4, higher than market expectation of 61.0 and also the highest level since November 2012. In addition, Fed Chairman Bernanke's congressional testimony strongly defended the Fed's ultra-loose monetary policy and offset investor concerns over Europe. The financial market thus rallied from previous lows.

As a consequence, LME copper rebounded significantly after testing a low at USD 7,785/mt and closed USD 62/mt higher at USD 7,892/mt. LME copper stocks added sharply by 7,650 mt to nearly as high as 440,000 mt.

With favorable US economic lifting markets, SMM believes that LME copper prices will drift slightly higher and move between USD 7,820-7,900/mt during Wednesday's Asian trading hours. Chinese stock markets will extend weakness. SHFE copper prices will start up before fluctuating near current levels, with great upside resistance. SHFE 1306 copper contract will hover in a range of RMB 57,200-57,800/mt. Shanghai spot copper discounts are estimated between RMB 100-220/mt versus SHFE 1303 copper contract.