SMM Lead Market Morning Review (2014-4-10)

SHANGHAI, Apr. 10 (SMM) – LME lead prices overnight started at USD 2,072/mt, and then advanced to the USD 2,075-2,080/mt range in the Asian trading session, hitting a high of USD 2,083/mt. During European and US trading hours, the metal initially pulled back to USD 2,070/mt, weighed down by downbeat economic data from Germany, and later recouped early losses to end up USD 13/mt at USD 2,087/mt. Traded volumes gained 498 lots to 3,905 lots, positions added 1,386 lots to 145,792 lots, and LME lead stocks stayed flat at 202,400 mt.

The most active SHFE 1405 lead contract price hovered between RMB 13,715-13,725/mt after opening at RMB 13,745/mt, and bounced back subsequently to finish down RMB 5/mt at RMB 13,740/mt during Wednesday’s night session. Traded volumes were 44 lots, while positions were off 8 lots to 6,306 lots.

The minutes from the US Federal Reserve’s March 18-19 meeting showed that policymakers were unanimous in demanding to raise the thresholds for an interest rate hike. In addition, the minutes did not specify the Fed was about to increase rates six months after the end of its QE stimulus program. Fed officials also chalked up recent US economic slowdown to unusually severe winter weather and claimed that the global economy could take a hit from the escalation of the Ukraine crisis. The minutes released Wednesday effectively eased market angst over the Fed’s possible rate hikes. In response, US share indexes were up across the board. The US dollar index closed lower for a fourth straight trading day, but non-US currencies had a strong showing.

In China, the State Council made public the mid-term review on the implementation of the twelfth five-year plan following the tax reduction for small enterprises and the acceleration of railway construction investment last week. The chief administrative authority pointed out that China’s economy would encounter downside pressure in the future, and that fiscal and monetary policies solely on demand management would not suffice to bolster growth. It proposed to attach due importance to both demand and supply management, and to concentrate on increasing supply and improving efficiency. Moreover, the People’s Bank of China (PBOC)’s governor Zhou Xiaochuan was reported to conduct inspections in Shenyang, Jiaxing, Hangzhou, and Shanghai in the next 14 days. This fueled hopes of new stimulus measures in markets.

In Europe, UK’s February trade deficit narrowed to GBP 9.094 billion, and imports and exports both fell. Germany’s February trade account surplus was only EUR 15.7 billion, while its exports fell by 1.3% to the worst level in nine months, but February imports rose to the highest since the reunification of Germany.

European and US share indexes closed higher. LME gold was up 0.25%, whereas LME silver was down 0.78%. LME base metals ended with gains, except for LME copper and zinc.

Market sentiment will be relatively bullish on Thursday after the release of the dovish minutes from Fed’s latest interest rate meeting. Investors should eye China’s trade data for March, among which imports will continue to be weak, but exports should beat February’s level. LME lead prices are set to move between USD 2,070-2,100/mt, and the most active SHFE 1405 lead contract price is forecast to fluctuate between RMB 13,700-13,780/mt. In China’s physical lead markets, traded prices should be in the RMB 13,600-13,750/mt band on Thursday.