SMM Lead Market Morning Review (2014-3-11)

SHANGHAI, Mar. 11 (SMM) – Disappointing Chinese trade data and PPI released at the weekend overnight aggravated market concern over a slowdown in the world’s second largest economy in Asian trading hours. In response, LME lead prices edged up to USD 2,090/mt briefly after gapping lower at USD 2,088/mt, and then fell to as low as USD 2,056.5/mt during the European trading session. Despite a lack of major news in US trading hours, LME lead prices rebounded to close up USD 12/mt at USD 2,087/mt.

Without guidance from major news and economic data, markets overnight continued to digest China’s first corporate bond default, and soft CPI and trade data announced over the weekend. The People’s Bank of China (PBOC) revealed China’s new lending and social financing fell during February sharply from January’s levels. The new lending totaled RMB 644.5 billion, well below the estimated RMB 716 billion and January’s RMB 1.32 trillion, while the social financing amounted to RMB 938.7 billion, down RMB 131.8 billion YoY. The sharp fall in both new lending and social financing may be directly linked to banks’ policies towards industries to experience economic restructuring and local debts.

Economic data from Europe was mixed. France’s January industrial output fell by 0.2% during January, a smaller fall compared to December’s 0.3% drop, but missing expectations for a 0.2% increase. The nation’s manufacturing output rose during February by 0.7% MoM, while the figure remained flat during January with December’s level. Investor confidence in the euro zone for March reached 13.9, above February’s 13.3 but shy of the expected 14. The single currency bloc’s economy still fell short of expectations despite signs of recovery.

The US dollar index rose by 0.03%, and the euro climbed by 0.05% against the greenback. LME gold and silver prices fell by 0.01% and 0.42%, respectively. LME base metals prices, except LME aluminum and nickel prices, ended lower. Copper prices led the declines in base metals markets since concern about China’s demand for finance-driven copper triggered massive sell-offs.

With the dearth of major news expected on Tuesday, lead prices should stage a rebound, but will be restrained by strong copper sell-offs. LME lead prices are forecast to move between USD 2,070-2,100/mt, and the most active SHFE lead contract is set to fluctuate between RMB 13,600-13,700/mt. In China’s physical lead markets, traded prices should be RMB 13,600-13,700/mt on Tuesday.