Metals markets experienced sharp losses after the release of US nonfarm payroll figures. The better-than-expected HSBC China manufacturing PMI released one day later did not boost up metals prices as expected, indicating a lack of confidence in markets and kept long investors on the sidelines. 

 

A series of economic data, including US durable goods orders, the Michigan Consumer Sentiment Index, US home sales and the ADP National Employment Report for October, will all be released beginning last Friday and throughout this week, with most investors generally pessimistic towards the results. Markets will not remain bullish as before since the anticipated delay of the US Fed’s QE exit has already been digested. 

 

LME lead prices will possibly fall this week and test the previous support level of USD 2,130/mt given downbeat economic indicators. 

 

SHFE lead prices tracked gains by LME lead prices last week, rising 2% to RMB 14,550/mt, but later fell back by 1%. The most active SHFE lead prices met resistance at the 6 and 60-day moving averages last week. When combined with declining LME lead prices, SHFE lead prices will likely fall this week, but find solid support between RMB 14,200-14,250/mt.   

  

In China’s spot lead market, discounts for spot lead prices expanded over the most active SHFE lead price since smelters traded aggressively as finished goods inventories grew and downstream demand remained weak. Tight supply in Shanghai caused prices gaps between spot prices in Shanghai and Guangdong, Hunan, and Jiangxi provinces. Spot lead prices will further decline this week due to tight month-end liquidity at smelters and downstream producers. In addition, price gaps between SHFE lead and spot lead will narrow since spot prices should be more resistant to declines than SHFE lead prices. In this context, previous lead supplies used by traders for arbitrage will enter markets, compounding oversupply of spot lead.