SHANGHAI, Mar.4 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 16,650/mt and settled at USD 16,635/mt overnight, up by USD 30/mt from a day earlier, with the intraday high at USD 16,775 mt and the low at USD 16,372/mt. Daily trading volumes were 4,622 lots, down 110 lots. Positions were 115,344 lots, down 1,755 lots. LME nickel inventories were 159,552 mt, up 1,572 mt.

China’s official PMI for February was 50.1, the lowest in four months, while HSBC’s China PMI for February was also below market expectation at 50.4, also below 52.3 recorded a month earlier. Although the two PMI are both above 50, the decline in PMI exerted negative impact on market. During the European and US trading hours, the unemployment rate hit a new high. Meanwhile, the meeting between President Obama and congressional leaders disappointed market, which means that the automatic cutting will take effect automatically. These weighed down LME nickel prices to hit USD 16,372/mt. However, during the New York trading hours, the profit-taking of shorts and better-than-expected manufacturing data from the US send LME nickel prices to close at USD 16,635/mt, the only metal closing with gains on Friday.

The US University of Michigan final consumer confidence index for February and ISM manufacturing PMI were both better than market expectation. However, the monthly rate of construction permits for January fell by 2.1%, the largest decline since July 2011, and also larger than 0.9% contraction recorded a month earlier, which reflected that economy still recovered slowly. In addition, the US automatic spending cut took effects, which will lower economic growth by 0.5 percentage point and lower employment positions by 750,000. However, Bernanke will continue QE measure, which will offset negative impact from downbeat economic data. The euro zone manufacturing PMI for February finalized at 47.9, slightly higher than market expectation. However, the Fitch warmed to cut credit rating of Italy due to the political uncertainty in Italy.

In China, China’s manufacturing PMI for February was 50.1, down 0.3% MoM. Meanwhile, the non-manufacturing PMI fell by 1.7% percentage points compared to a month earlier. It is believed that the slight decline in manufacturing PMI and non-manufacturing PMI was due to holiday factor, and exerted limited impact on market. Currently, industrial production was relatively stable, and market expectation towards future outlook was relatively optimistic. However, the release of five measures to rein on real estate market fueled wait-and-see sentiment in the market. In addition, the Chinese People's Political Consultative Conference (CPPCC) was held from March 3rd in Beijing, which caught great attention from home and broad.

The US dollar index surged to 82.5 last week, suggesting strong risk aversion sentiment in the market. However, as the manufacturing data from China and the US were both positive, market expectation towards demand in 1Q and 2Q is positive. SMM thus expects that LME nickel prices will move between USD 16,300-16,400/mt on Monday. In the Shanghai nickel spot market, spot nickel prices will move between RMB 116,500-118,500/mt on Monday.