SMM Tin Market Morning Review (2013-5-23)

 

LME tin market overnight fluctuated narrowly during Asian trading hours, as the Bank of Japan’s announcement to leave its easing monetary measures unchanged exerted a limited influence on the market. Market players shifted their attention to the comments by US Federal Reserve Chairman Ben Bernanke. His announcement to maintain the QE measures unchanged sent the dollar down, driving up metals prices. However, his views that the US will scale back its asset purchasing program if the economy witnesses further improvement pushed up the dollar, weighing down metals prices. Finally, LME tin prices ended at USD 21,400/mt, up USD 115/mt from a day earlier. 

 

US Federal Reserve Chairman Bernanke’s speech last night came under the spotlight. Bernanke explicitly expressed support for QE3 in his testimony, boosting market sentiment and helping US stocks hit a new record high. Nevertheless, during the Q&A session, Bernanke said that the FOMC may scale back asset buying during policy meetings to come and that whether or not to curtail bond purchases depends on how economy evolves. The minutes of the May policy meeting indicate that a majority of Fed officials are in favor of using future economic data as the basis for deciding whether to slash accommodative monetary policy or not. In response, US shares pulled back from high levels and ended in negative territory. The US dollar index rebounded to hit a fresh high since July 2010. The US existing home sales were 4.97 million units in April, missing forecasts and weighing on base metal prices.        

 

Retail sales in the UK surprised markets with a 1.3% drop in April, the biggest decline since April 2012. As widely expected, Bank of England (BOE) Governor Mervyn King called again for an extra 25 billion pounds of asset purchases. His appeal was echoed by Paul Fisher and David Miles.

 

According to the minutes of the interest rate meeting by the Bank of Japan (BOJ), the BOJ will continue to expand monetary by JPY 6-7 trillion each year and keep interest rate unchanged at 0-0.1%. Meanwhile, the BOJ revised the country’s current economic situation as “on the rise, a fifth straight month of hike in economic situation assessment. This sent Nikkei soaring 1.6% to a 5-1/2-year high.  

 

The central parity rate of RMB against the US dollar was 6.1904 yesterday, up 7 basis points from previous day’s 6.1911. The US dollar strengthened against weakening of a basket of other currencies (except RMB). The People’s Bank of China (PBOC) has cut intervention in exchange rate market, which is conducive to ease pressure from increased money supply. However, strengthening central parity rate of yuan will raise expectations for RMB appreciation and attract more capital. The PBOC issued RMB 10 billion in bills on Tuesday and RMB 9 billion in 28-day repurchase. The PBOC will issue another RMB 6 billion in bills today. With capital continuously flowing into China, bill issuance and repurchase alone are only a makeshift.    

 

In other markets, the US dollar index gained 0.54%. US equities closed down across the board, whereas Asian stocks were mixed. All LME base metals ended in positive territory.  

Attention should be paid to economic figures from China and Europe, and the US initial jobless claims. LME tin market is under downward pressures in response to Ben Bernanke’s talks over the asset purchase program, with prices expected between USD 21,400-20,800/mt. In the domestic tin market, prices are expected between RMB 145,500-147,500/mt on Thursday.