SMM Morning Review - 2010/2/22 Copper Market

SHANGHAI, Feb. 22 (SMM) --

Data source: LME

On February 12th, the People's Bank of China (PBOC) announced that it will raise the deposit reserve requirement ratio (RRR) for Chinese financial institutions by 0.5 percentage points from Feb. 25 this year, and the rise is the second for the deposit ratio in 2010, helping raise market concerns over China’s move to tighten monetary policy. Meanwhile, the rising US retail sales pushed up the US dollar index to 80.74, and LME copper prices declined from USD 6,900/mt to USD 6,795/mt in response.

During February 15-16, the European countries urged Greece to take measures to control its fiscal deficit within three months, and investors believed the Euro dropped excessively previously, and the Euro rebounded as a result. In this context, the US dollar index fell below 80 to 79.6, driving up LME copper prices to USD 7,000/mt, and LME copper prices stood firm above USD 7,100/mt.

On February 17th, the US announced its housing starts in January were 591,000 units, higher than expected level of 580,000 units. The US industrial output in January increased by 0.9% on a monthly basis. These positive data helped offset the negative impact from advancing US dollar on copper prices, and LME copper prices remained on an upward track, with prices breaking through USD 7,200/mt.

On February 18th, the positive manufacturing data and consumer confidence index boosted investor confidence, and optimistic expectations with regard to post-holiday Chinese consumption also helped drive up LME copper prices to the resistance level of USD 7,300/mt.

On February 19th, the US Federal Reserve announced to raise the discount lending rate on Thursday, generating market concerns over the US interest rate hikes, and the US dollar index hit the highest level of 81.34. However, LME copper prices did not drop, but advanced to USD 7,400/mt supported by rising market confidence, with prices finally ending at USD 7,415/mt.

On February 22nd, SHFE copper market will open, and SHFE copper prices will likely advance to the daily trading limit. Meanwhile, rising copper prices will also boost investor confidence, and SMM predicts LME copper prices will remain strong after the holiday, with prices expected to test USD 7,500/mt.

To contact the writer on this report: iriszhu@smm.cn

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