SMM Copper Market Morning Review (2014-3-4)

SHANGHAI, Mar. 4 (SMM) – US stocks closed lower on Monday, with the Dow falling 0.94%. The Ukraine crisis added to jitters in markets, causing investors to withdraw from high risk assets. Thus, the US stocks were dragged down, while US dollar index rose above 80. HSBC’s final China manufacturing PMI sank to 48.5 in February, down from January’s 49.5, triggering concerns over copper demand from China. LME copper prices touched a three-month low of USD 6,944/mt before ending at USD 6,968/mt, losing USD 44.3/mt.

SHFE most active copper contract prices started at RMB 48,680/mt at Monday’s night session and dipped as low as RMB 48,600/mt. The prices finished the night trading down RMB 260/mt at RMB 48,710/mt. Traded volumes remained low.

The HSBC China manufacturing PMI for February was finalized at 48.5, well below the 49.5 in January. The index fell to a seven-month low and echoed the soft official PMI released Saturday.

Elsewhere in Ukraine, crisis escalated after more Russian troops arrived in Crimea. Although rumors that Russia has delivered ultimatum to Ukraine have been dispelled by Russia’s Defense Ministry, the crisis has been affecting EU, US and Russia. Russia has moved to sell billions of dollars and ratchet up interest rate to curb the plunge in ruble. In response, European and US equities fell across the board.

In the US, January building permits rose by 0.1% on the month, better than the 0.3% fall expected. ISM manufacturing PMI for February also beat the 52.3 forecast at 53.2. With influence of the brutal cold fading, market showed more confidence in US recovery, driving the dollar up.

Upbeat data from the euro zone, however, gave little boost to the market. The euro zone manufacturing PMI for February was revised upward to 53.2, with the index for France also revised up to 49.7, from the preliminary 48.5. Italy’s manufacturing PMI was down to 52.3 last month, but stayed above 50 for eight months straight. Manufacturing PMI for Spain grew to its highest since April 2010 at 52.5.

On the London Metal Exchange, only zinc and nickel closed higher.

SHFE 1405 copper contract may trade at RMB 48,500-49,000/mt on Tuesday, and spot copper in China should be offered at discounts of RMB 80-200/mt against the SHFE current month copper contract prices.