SMM Lead Market Morning Review (2014-3-4)

SHANGHAI, Mar. 4 (SMM) – The majority of economic reports from the US and European countries released overnight were revised up. Intense relationship between Ukraine and Russia, however, battered commodities and financial markets, with global stocks mostly down. In response, LME lead prices overnight dipped as low as USD 2,096.8/mt after starting at USD 2,130/mt, and finally closed down USD 23/mt or 1.08% at USD 2,109/mt. The metal has fallen below most commonly used moving averages, and will test support at the USD 2,100/mt mark. Trading volumes gained 1,164 lots to 4,839 lots, positions increased 2,110 lots to 128,731 lots, and LME lead inventories rose 550 mt to 202,775 mt.

The most active SHFE 1404 lead contract opened at the lowest level of RMB 13,770/mt in Monday’s night session since it was launched, and finished down RMB 25/mt or 0.18% at the session high of RMB 13,810/mt. Trading volumes were only 38 lots, the smallest amount since the introduction of the night session.

The HSBC China manufacturing PMI for February was finalized at 48.5, well below the 49.5 in January. The index fell to a seven-month low and echoed the soft official PMI released Saturday.

Elsewhere in Ukraine, crisis escalated after more Russian troops arrived in Crimea. Although rumors that Russia has delivered ultimatum to Ukraine have been dispelled by Russia’s Defense Ministry, the crisis has been affecting the EU, US and Russia. Russia has moved to sell billions of dollars and ratcheted up interest rate to curb the plunge in ruble. In response, European and US equities fell across the board.

In the US, January building permits rose by 0.1% on the month, better than the 0.3% fall expected. ISM manufacturing PMI for February also beat the 52.3 forecast at 53.2. With influence of the brutal cold fading, market showed more confidence in US economic recovery, driving the dollar up.

Upbeat data from the euro zone, however, gave little boost to the market. The euro zone manufacturing PMI for February was revised upward to 53.2, with the index for France also revised up to 49.7, from the preliminary 48.5. Italy’s manufacturing PMI was down to 52.3 last month, but stayed above 50 for eight months in a row. Manufacturing PMI for Spain grew to its highest since April 2010 at 52.5.

On the London Metal Exchange, only zinc and nickel closed higher.

Euro zone’s January PPI and testimony concerning the appointment of several US Federal Reserve officials should be eyed on Tuesday, and soft Chinese metals demand and turbulence in Ukraine will hurt risk appetite. In this context, LME lead prices are expected to test previous support levels and move mostly between USD 2,090-2,120/mt on Tuesday. The most active SHFE 1404 lead contract is expected to extend losses to fluctuate between RMB 13,750-13,840/mt. In China’s physical lead markets, trading activity will remain light, and traded prices will be mostly between RMB 13,700-13,800/mt on Tuesday