SHANGHAI, Oct. 24 (SMM) – Worries over the tightening of China’s monetary policy were aggravated by the report on Wednesday about write-off of non-performing loans in some large Chinese banks. In response, short-term money market interest rate surged, while stocks and metals markets slid. During the European and US trading hours, US house prices rose at a less feverish pace than forecast, while US financial reports were mixed. As a result, lead markets, following other downbeat neighboring markets, trended down to find a support.
LME lead prices overnight started at USD 2,201/mt and later dipped below the 5-day moving average and tentatively found support at the 10-day moving average, following pressures from profit taking. LME lead prices finally ended at USD 2,165/mt, down USD 33/mt or 1.5%, reversing gains in the first half week.
The preliminary PMI readings from China, Eurozone, Germany and France, are due to be released, and the lead market will be boosted somewhat if results are positive.
The European and US stock markets and commodity markets registered sharp losses due to increasing profit taking after the release of the US nonfarm payrolls. Short investors have shifted their attention to China. The People’s Bank of China (PBOC) suspended reverse repos against overheated credit lending in September. Sources indicated yesterday that write-off of non-performing loans at China’s five major banks during H1 reached RMB 22.1 billion, tripling the RMB 7.65 billion recorded for the same period last year. Investors are worried that banks will tighten lending in response to growing bad loans.
The Federal Housing Finance Agency (FHFA) reported that US home prices rose 0.3% in August from July. Although this marks a 19th straight month of gain, the growth rate was the lowest level in 11 months. Consumer Confidence Index in the euro zone rose to -14.5 in October, up from September’s -14.9. Minutes of the Bank of England (BOE)’s October policy meeting indicated that the country’s unemployment rate in H2 2013 will fall at a faster pace than expected and economic growth will accelerate. Spain posted a 0.1% QoQ growth in its Q3 GDP, ending a nine-quarter recession. Upbeat European economic data helped the euro stay above 1.37 against the US dollar.
European and US shares generally closed with losses. Base metals on the London Metal Exchange also closed the day down.
Markets will possibly witness slight corrections on Thursday since profit-taking pressure is expected to ease following a slump on Wednesday. Besides, China’s manufacturing PMI is expected to be upbeat and will likely give a boost to markets. LME lead prices will fluctuate between USD 2,150-2,180/mt, while SHFE lead prices will hover in RMB 14,350-14,450/mt range and spot lead prices are expected between RMB 14,200-14,300/mt on Thursday.