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LME Copper for 3-month delivery extends yesterday's strength and rises to 4550.25 in European morning as driven by lower-than-expected production data in Chile. Production in the Escondida mine, which contributes around 5% of the world copper output, will decline by 30% this year, compared with market expectation of 20-25% drop.

Although corrections in copper and other industrial metals have stabilized, we view this as a mild consolidation and expect further fall from current level. In fact, the rally since the end of March was driven by improved market sentiment, rather than solid recovery in fundamentals. Such rally has been overextended and, if no followed by a meaningful correction, will temper healthy recovery of the metal market because prices have rocketed so high that sellers find it attractive to sell while buyers would delay purchase.

Industry data in the first 2 months of 2009 reflected that the market is still in surplus. According to the World Bureau of Metal Statistics, global market was in a surplus of 112K tons in January and February, compared with a deficit of 109K tons over the same period in 20098. Copper mine production at 2.507M tons was 4% higher yoy while consumption was 3% lower.

Moreover, recent strength in industrial prices, particularly copper price, was concentrated in back-end contracts. This is an indication that investors/speculators have grown more bullishness over long-term economic outlook.

Crude oil price holds steadily around 48/49 level despite poor fundamentals as the stock markets advance. In the near-term, we expect oil price will continue to trade within a narrow range and investors are on one hand spurred by rallies in stock market while on the other hand disappointed by poor inventory data.

In Asia, the MSCI Asia Pacific Index gained 1.4% and Japan's Nikkei 225 Stock Average added 1.37%. In European morning shares also open higher after better-than-expect PMI data from the Eurozone.

In April, services and manufacturing PMIs rose to 43.1 and 36.7, from 40.9 and 33.9 respectively in the previous month. The 6th consecutive month of improvement sent a message to the market that, while contraction remains, the worst may probably be over in the Eurozone. Moreover, current account deficit in the 16-nation region also narrowed to 8.1B euro in February from 12.7B euro in the previous month.