SMM Zinc Market Morning Review (2013-7-2)

SHANGHAI, Jul. 2 (SMM) – Macroeconomic news released overnight was mostly positive. European and US manufacturing indices topped expectations, boosting European and US stocks to close the day with gains. The US dollar index, however, slowed increases, pushing up LME zinc prices.

LME zinc prices overnight opened at USD 1,855.3/mt. Despite the sluggish China's June PMI, LME zinc prices stood at USD 1,850/mt during Asian trading hours as a large number of buyers entered the market. Upbeat economic data drove up overseas financial markets and commodity prices, pulling up LME zinc prices to break through all moving averages, touching USD 1,888.5/mt, and finally closing at USD 1,882.8/mt, up USD 27.8/mt or 1.5%.

Trading volumes decreased by 557 lots, to 8,179 lots, and total positions decreased by 388 lots, to 266,571 lots. LME zinc inventories fell by 5,400 mt, to 1,056,075 mt.

Economic data from Europe and US overnight was positive and pushed up stocks and commodity prices. US June ISM manufacturing PMI was 50.9, higher than 49 in the previous month and the expected 50.5. Boosted by the recovering property market, US construction spending increased by 0.5%, to USD 874.9 billion in May, a record high in four years. June PMIs in all euro zone countries rose except for Germany, with the final euro zone PMI recording 48.8, a record high in 16 months. PMIs in Italy, Spain and Greece also climbed to a 2-year high. In this context, stocks markets and commodity prices were drove up by strong long momentum.

But China's economic data released yesterday was mixed. China's official June PMI was 50.1, a record low for the year, which was mainly dragged down by new order index and production and operation activities index; HSBC's June PMI for China recorded 48.2, standing below 50 for a second consecutive month, with output index, new export order index and employment still sluggish. As China's capital crunch eased, the Shanghai Composite Index gained back losses at noon and closed up 1%.

The US dollar index fell by 0.21%, to 83; LME base metals prices closed with increases.

LME zinc prices will move between USD 1,865-1,895/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,520-14,640/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 50-100/mt.