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SMM Lead Market Morning Review (2014-3-6)
Mar 6,2014 09:27CST
price review forecast
LME lead prices are expected to move between USD 2,120-2,145/mt, and the most active SHFE 1404 lead contract are set to fluctuate between RMB 13,860-13,970/mt.

SHANGHAI, Mar. 6 (SMM) – Markets remained focused on developments of Ukraine crisis on Wednesday, and a slew of disappointing US economic reports also aggravated concern over the nation’s nonfarm payrolls report due for release on Friday. Markets were still dominated by wary sentiment despite an uptick in final PMIs from the euro zone countries. In this context, LME lead prices overnight broke above the 60-day moving average after starting at USD 2,139/mt, and rose as high as USD 2,168/mt in Asian trading hours. As other base metals prices and financial markets experienced loss later, LME lead prices surrendered most of early gains, and closed down USD 15.5/mt or 0.72% at USD 2,126.5/mt. Trading volumes gained 872 lots to 6,010 lots, positions expanded 2,719 lots to 132,932 lots, and LME lead inventories contracted 125 mt to 202,650 mt. Since ECB President Mario Draghi indicated overnight the euro zone is not experiencing deflation, it is highly likely the ECB will take no significant steps towards its monetary policy at the latest interest rate meeting on Thursday. The euro will become stronger against the US dollar, offsetting bearish sentiment to some extent.

The US ISM non-manufacturing PMI sank to a four-year low of 51.6 in February, lagging behind the 53.5 forecast and January’s 54.0. The US private sector added 139,000 jobs in February, shy of the 155,000 expectations, and gains in January were revised lower from 175,000 to 127,000, according to the ADP report. Goldman Sachs and Deutsche Bank cut their projections for non-farm payrolls subsequently. Nevertheless, the US Federal Reserve’s Beige Book indicated manufacturing in a majority of federal districts was still expanding mildly despite adverse weather conditions which affected hiring and consumption, and labor market continued to improve. 

In the euro zone, the final service PMI for February was revised up to 52.6, and the composite PMI was finalized at 53.3, both hitting a six-month high. Retail sales in the single currency union grew by 1.6% on the month and 1.3% YoY in January, beating forecast and December’s level.

China’s forex receipts rose by RMB 437.4 billion in January, the highest since last October and growing for six months in a row. New forex receipts in December were RMB 272.9 billion. The increasing forex receipts also explained the PBOC’s continuous bond repurchases.

Most European and US stocks declined Wednesday, and LME base metals rose initially, but then gave back early gains.

Russia sold large sum of dollars and Russian lawmakers were reportedly working on a bill to allow the confiscation of property, assets, and accounts of European or US companies should sanctions be imposed on Russia, meaning the Ukraine crisis has not been settled yet. In this context, SHFE base metals are expected to fall slightly on Thursday.

Investors should watch closely the Bank of England (BOE) and European Central Bank (ECB)’s interest rate meetings, US initial jobless claims figures, and developments of the National People’s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) on Thursday. LME lead prices are expected to move between USD 2,120-2,145/mt, and the most active SHFE 1404 lead contract are set to fluctuate between RMB 13,860-13,970/mt. In China’s physical lead markets, traded prices should be mostly between RMB 13,700-13,850/mt on Thursday.

LME lead prices
SHFE lead prices
spot lead prices

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