SMM Lead Market Morning Review (2014-4-2)

SHANGHAI, Apr. 2 (SMM) – Base metals markets overnight still lacked clear guidance on a deluge of mixed economic data released on Tuesday. LME lead and zinc prices closed down, pressured by growing inventories, but other LME base metals prices rose. LME lead prices hovered between the 5-day and 10-day moving averages after starting at USD 2,061.5/mt, and then dipped to a low of USD 2,044.25/mt due to a broad selloff. The metal finished down USD 23/mt, or 1.11%, at USD 2,047/mt. Lead prices fared worse than other base metals prices since lead consumption entered a seasonally low period with warmer weather. Trading volumes gained 1,206 lots to 4,012 lots, positions added 467 lots to 138,000 lots, and LME lead inventories expanded 1,325 mt to 201,650 mt.

The ISM manufacturing index, though below the 54 expected, improved to 53.7 in March. In the euro zone, manufacturing PMI was finalized at 53, matching estimate. PMIs for France, Italy, and Spain were revised upward to 52.1, 52.4, and 52.8, respectively, with only German index revised down to 53.7. Euro zone jobless rate in February dropped to 11.9%, and the number of the unemployed was down 12,000 in Germany during March, better than the 10,000 decline expected. This allowed the country’s unemployment rate to fall to 6.7%, lifting European and US stock prices.

The final HSBC manufacturing PMI for China was reported at 48, even lower than the preliminary reading which hit an eight month low. But the official PMI registered an increase from February to 50.3, driven by recovery in large enterprises, while the sub-indices for both small and medium companies remained below 50, in line with the HSBC PMI which mainly reflected activity at SMEs.

Xuzhou's Zhongsen Tonghao New Board in China missed an interest payment due March 28. This would be the first default in China's private-placement market, which may weigh the market on.

The US dollar index edged lower to end at 80.08. LME lead and zinc closed lower, while other base metals on the exchange posted slight rises.

US ADP jobs report for March and February factory orders due Wednesday both are expected to be positive, helping boost market confidence towards the country’s economic recovery. LME lead prices followed other base metals prices up after gapping lower at USD 2,040/mt, and are expected to move between USD 2,040-2,060/mt on Wednesday. The most active SHFE 1405 lead contract price is set to hover between RMB 13,680-13,780/mt, and spot lead prices will be mostly in the RMB 13,600-13,700/mt range with the lack of buying support.