SMM Zinc Market Morning Review (2013-7-22)

SHANGHAI, Jul. 22 (SMM) – LME zinc prices last Friday opened at USD 1,858/mt, rising to the 30-day moving average as a large number of longs entered the market. But Asian stocks dropped across the board at noon, with the Shanghai Composite Index, the Nikkei Index and the FITX dropped by over 1%, distressing the market and pushing down LME zinc prices to USD 1,872/mt, and finally closing at USD 1,864.5/mt, up USD 3.5/mt or 0.19%.

Trading volumes decreased by 1,852 lots, to 6,395 lots, and total positions increased by 1,051 lots, to 251,057 lots. LME zinc inventories fell by 4,000 mt, to 1,071,625 mt. China's central bank announced last Friday it will eliminate restrictions of loan interest rates for financial institutions, and this is expected to simulate credit loan and economic activities and push up Chinese stocks and zinc prices. But zinc prices gains will be restricted due to market caution ahead of PMIs from many countries released Tuesday.

Japan's ruling coalition led by Shinzo Abe won a majority of seats in the upper house of parliament in Sunday's election, which will give his party a stronger mandate to implement reforms aimed at invigorating the country's economy and a stronger control over both houses of parliament. However, the coalition failed to secure two- thirds approval by both houses of parliament, disappointing markets some.

The People's Bank of China (PBOC) announced last Friday it will cancel the minimum limit of 0.7 times for interest rates by financial institutions. This will help reduce financing costs for enterprises and promote development of the real economy. Base metals prices will gain traction for the near term as a result. 
Canada's CPI rose 1.2% YoY in June, a four-month high. The index, however, fell short of the 2% target due to rising gasoline prices and passenger vehicle costs. This will give the central bank of Canada no pressure to hike interest cuts, pushing the Canadian dollar up against the US dollar. Italy's industrial orders advanced 3.2% MoM in May, the third straight month of growth due to growing demand domestically and overseas. Germany's PPI climbed 0.6% YoY in June, in line with forecasts.  

The US dollar index shed 0.17%, while the Euro index closed 0.23% higher last Friday. Global stock markets mostly dropped, but S&P 500 index continued to hit new record high. LME base metals prices inched up, except aluminum and tin. 

LME zinc prices will move between USD 1,860-1,885/mt today, and SHFE 1310 zinc contract prices should fluctuate between RMB 14,530-14,630/mt, with spot premiums against SHFE 1309 zinc contract prices between RMB 70-110/mt.