SHANGHAI, Mar. 4 (SMM) – Last Friday, copper markets continued to absorb relatively soft Chinese economic data. The European manufacturing PMI for February released later also came in disappointing and sent the euro to the lowest level thus far this year. The US dollar index, though, surged to a 6-month high of 82.509, which weighed on commodity markets. Besides, talks between the US two political parties on budget cuts yielded no new progress, so the USD 85 billion worth of automatic spending cut worth took place. Meanwhile, LME copper stocks increased sharply by 12,075 mt to around 458,775 mt, the highest since October 2011, and a total increase of 43%, also depressing market sentiment. SHFE copper stocks also rose to roughly 226,201 mt and moved towards record highs. In context of these unfavorable factors, LME copper prices dipped below USD 7,700/mt again and tested a low at USD 7,652/mt. Nevertheless, at the tail of trading, the US reported consumer spending increased for a third straight month in January, and consumer confidence and ISM manufacturing PMI indexes were both better than anticipated. In this context, US equity markets rallied from previous lows and helped LME copper recoup some of declines before closing at USD 7,720/mt, a loss of USD 96/mt.

LME copper is likely to extend weakness with bearish sentiment growing, but declines may slow as technical indicators are approaching overbought territory. As such, SMM believes that LME copper prices will move between USD 7,680-7,780/mt during Monday's Asian trading hours. Chinese stock markets will fluctuate at highs. SHFE copper prices will probably pare some of earlier declines after opening slightly down, and SHFE 1306 copper contract will hover in the RMB 56,500-57,000/mt range. Shanghai spot copper discounts are estimated between RMB 50-150/mt versus SHFE 1303 copper contract.