SHANGHAI, Mar. 5 (SMM) – Tensions between Ukraine and Russia eased overnight, giving a boost to risk appetite. Global stocks and base metals prices thus rose sharply, but gold and silver prices tumbled. LME lead prices overnight hovered most of Asian and European trading hours around the opening mark of USD 2,113/mt, and later rallied above the 5-day, 10-day, 20-day, and 30-day moving averages. The metal then faced temporary resistance at USD 2,140/mt, and finally closed up USD 33/mt or 1.56% at USD 2,142/mt. Trading volumes gained 299 lots to 5,138 lots, positions increased 1,842 lots to 130,213 lots, and LME lead inventories held flat at 202,775 mt. Rising prices for zinc, extracted from lead and zinc ores, should lend some support to lead prices.
High risk assets rallied Tuesday as Ukraine tensions eased. Russian President Vladimir Putin said Russia will only use force as “a last resort” in Ukraine, but will provide financial aid to the Crimea region and reserve the right to deploy Russia troops in the region. In response, the S&P 500 index hit a record high, while gold and silver slumped.
The euro zone PPI fell 0.3% MoM and 1.4% YoY in January, worse than market forecasts. The index, which staged its biggest YoY declines since December 2009, reflected the single currency bloc's stuttering economic recovery.
UK construction PMI for February dropped from January’s 64.6 to 62.6, missing the 63 expected.
In China, the People's Bank of China (PBOC) conducted RMB 35 billion of 14-day bond repurchases and RMB 50 billion of 28-day repurchases on Tuesday. The central bank hasn't conducted 28-day repo operations since June 2013. However, money rates continued to fall, which was considered a result of sharp rise in forex receipts during the first two months of the year.
China retained a target for GDP growth of about 7.5% in 2014, according to the work report delivered by Premier Li Keqiang this morning. The goal for M2 growth and inflation was set at 13% and 3.5%, respectively.
European and US equities increased Tuesday, and so did LME base metals.
The ongoing National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) will release some clues on further economic reforms this year, and Premier Li Keqiang’s government work report should also be eyed on Wednesday. Investors should also be focused on US February ADP employment report due for release in the evening and developments of turbulence in Ukraine.
LME lead prices are expected to move between USD 2,130-2,155/mt, and the most active SHFE 1404 lead contract is set to hover between RMB 13,870-13,970/mt on Wednesday. In China’s physical lead markets, traded prices will be mostly between RMB 13,750-13,900/mt.