SMM Morning Review – 2012/7/24 Nickel Market

SHANGHAI, Jul. 24 (SMM)—LME nickel market overnight opened at USD 15,950/mt, with the highest and lowest level of USD 15,953/mt and USD 15,488/mt, respectively. Finally, LME nickel market closed at USD 15,600/mt, down USD 320/mt from a day earlier. Transactions for the day were 3,308 lots, up 1,196 lots. Positions were 106,025 lots, down 1,046 lots. Inventories were 110,622 mt, down 36 mt.

Asian stocks markets came under great downward pressures after the yield of Spain’s 10-year bonds rose to a new high of 7.368%. The Shanghai Composite index was closer to a low of 2132.63 points, Nikkei index lost as much as 1.86%, and Hang Seng index was down by more than 3%. Depressed by tumbling stocks prices, LME nickel opened lower on Monday, and hit a new fresh low of USD 15,488/mt, with a strong risk aversion sentiment. Finally, LME nickel prices ended at USD 15,600/mt, down USD 320/mt from a day earlier.

LME base metals market overnight largely closed lower. Spain’s bond yields surged to new historical high due to reports that some regions in Spain will apply for government’s financial aid, driving the US dollar index up. Spain’s eastern region of Murcia would apply for fiscal aids from the government following the Valencia, pushing the country’s 10-year bond yield to climb above 7%. Market investors feared Spain will be the fourth country to seek for a bailout in the euro zone, adding to risk aversion and leading to slump in global stocks and commodities. Market will focus on HSBC’s China flash PMI for July to be released July 24. The data will be one of the signals reflecting China’s economic prospects.
 
The rising yield of Italy and Spain’s bonds yields and the falling yield of Germany’s bonds yield have added to market risk aversion sentiment. Besides, the lowered outlook for credit ratings of Germany, the Netherlands and Luxembourg will further weigh down the market. SMM expects LME nickel prices to move between USD 15,300-15,800/mt, and Shanghai nickel spot prices will move between RMB 113,500-116,500/mt on Tuesday.