SMM Copper Market Morning Review (2013-4-22)

SHANGHAI, Apr. 22 (SMM) – Worries over slowing global economy and weak demand in China continued to dampen market sentiment last Friday. Commodity prices remained depressed. The Fitch downgraded the UK’s sovereign credit rating and long-term foreign currency and local currency Issuer Default Ratings from AAA to AA+, with stable outlook, due largely to the country’s worsening economic and fiscal outlook. The UK’s GDP over the next two years may not be able to recover to levels seen in 2007. Some investors turned to the US stocks, helping US stocks close up. However, dragged down by bearish earnings report and concerns over economic growth, the Dow Jones shed 2.1% last week, NASDAQ fell 2.7% and S&P 500 lost 2.1%. It was reported that the only railway linking Zambia to the coast of east Africa has resumed operations following two weeks of suspension earlier. LME copper inventories increased 2,000 mt to 614,350 mt last Friday, a 10-year high. LME copper fell to USD 6,875/mt at the bottom during the European session, and finally closed at USD 6,967/mt, down 1.5%. Panic mood continued to dominate the market.   

The two-day G20 meeting concluded on April 19. Officials attending the meeting have reached a consensus not to set too rigid spending cut goals for EU members so as to leave room for economic development. This lifted European stocks to some extent. 

The Fitch downgraded the UK’s sovereign credit rating to AA+ from AAA due to gloomy economic outlook and the ongoing austerity in the country. The S&P will likely downgrade the UK’s credit rating further. Markets are now eyeing the UK’s Q1 GDP due this week. Italian President Giorgio Napolitano has been re-elected. He failed in his attempts to form a coalition government due to strong opposition from center-left coalition. He is finally able to establish coalition government by dissolving parliament now that he has been re-elected. However, Pier Luigi Bersani announced he will resign after new president takes office, which means Italy’s political impasse is far from over.

A firm US dollar will keep LME copper in check within USD 6,800-6,950/mt during the Asian trading hours on Monday. The Shanghai Composite Index will fall back due to the earthquake in Sichuan, while SHFE 1308 copper contract will move in a RMB 49,700-50,500/mt range after starting the day lower. In spot markets, cargo holders will be eager to sell, with spot copper premiums expected to narrow to RMB 100-200/mt against SHFE 1305 copper contract.