SMM Lead Market Morning Review (2014-3-27)

SHANGHAI, Mar. 27 (SMM) – LME lead prices overnight trended higher to USD 2,097/mt after starting at USD 2,085.8/mt, boosted by technical corrections and expectation for China’s stimulus measures. The metal, however, met strong resistance at the USD 2,100/mt mark. During European and US trading hours, LME lead prices closed down USD 20.25/mt at USD 2,062.5/mt against escalating tensions in the Ukraine crisis and downbeat US economic data. Trading volumes shed 16 lots to 3,667 lots, positions contracted 817 lots to 137,423 lots, and LME lead inventories fell 75 mt to 200,625 mt.

US February durable goods orders rose for the first time in three months by 2.2% MoM, well above the estimated 0.8%, in a sign that the US economy is on a firmer footing. However, orders for civil and defense aircraft and spare parts contributed mostly to the surge in total durable goods orders, while orders for non-defense capital goods excluding aircraft fell 1.3%, missing expectations. After the release of these data, the US dollar fell immediately, gold prices bounced back slightly, and US Treasury yield dropped.

Later on, US President Barack Obama said the Western world is united against Russia's takeover of Crimea and would impose further sanctions on Moscow if it does not free Crimea from its grip. He added that if Russia stays on its current course the consequences for the Russia economy will continue to grow. As a result, US stocks retreated across the board.

In addition, IMF data show that Russia increased its gold reserves by 7.247 mt in February to a total of 1,042 mt, and held more than USD 400 billion of foreign exchange reserves.

The US dollar index rose 0.11%. Three major US stock indexes closed lower. LME base metals prices fell broadly.

LME lead prices are expected to move between USD 2,050-2,070/mt on Thursday, and the most active SHFE 1405 lead contract price is set to hover between RMB 13,730-13,830/mt. In China’s physical lead markets, traded prices will hold flat between RMB 13,650-13,750/mt on Thursday.