SMM Lead Market Morning Review (2014-4-11)

SHANGHAI, Apr. 11 (SMM) – LME lead prices overnight started at USD 2,085.8/mt, and then sank to USD 2,080/mt, weighed down by downbeat Chinese trade figures for March. During European and US trading hours, the metal bounced back to as high as USD 2,117.5/mt, helped by the declining US dollar index, and closed up USD 27.8/mt at USD 2,114.8/mt. Traded volumes expanded by 1,641 lots to 5,546 lots, positions added by 2,002 lots to a record 147,794 lots, and LME lead stocks remained flat at 202,400 mt.

The most active SHFE 1405 lead contract price opened at RMB 13,710/mt, and finished up RMB 35/mt at RMB 13,750/mt during Thursday’s night trading hours. Traded volumes were merely 14 lots, while positions were off 8 lots to 6,326 lots.

China’s March trade data released Thursday significantly fell short of market expectations. Import and export value fell by 1% to a total of USD 965.88 billion during the first quarter, adding to concerns that China’s Q1 GDP growth could fall to a five-year trough. Commodity imports, however, failed to decrease with copper imports up 37.8% YoY to 1.33 million mt during the same period. Base metals and financial markets responded little to these mixed figures, though.

In the US, the initial jobless claims made public overnight were reported at 300,000 last week, overshooting forecasts and touching the lowest level since May 2007. Despite the encouraging jobless claims, three main US share indexes surrendered gains over the last two trading days against disappointing estimates for US stocks financial reports and IPOs by 14 enterprises. The Dow and the S&P 500 notched the biggest daily fall since February 3, while the Nasdaq recorded the largest daily decline since November 9, 2011. The tumble in US stocks should restrict the rebound in base metals prices in the near term.

The Bank of England announced overnight to keep its 0.5% benchmark interest rate and GBP 375 billion bond-buying stimulus programme unchanged, which matched market forecasts. It was also worth noting that Greece returned to the capital markets by selling EUR 3 billion worth of bonds since its economy nearly collapsed in 2010. The Greek economy has showed some signs of recovery in the wake of bailouts and debt restructuring following the European debt crisis, boosting hopes of the euro zone’s economic recovery.

Asia-Pacific stocks were mixed, while European and US stocks were mostly down. LME gold and silver closed up 0.54% and 0.79%, respectively. LME base metals prices ended higher across the board.

The continuous fall in the US dollar index is expected to offer upside impetus to base metals prices on Friday, but investors should also pay attention to China’s CPI and PPI for March. LME lead prices are set to move between USD 2,100-2,130/mt, while the most active SHFE 1405 lead contract price is forecast to hover between RMB 13,720-13,800/mt. In China’s physical lead markets, prices should be in the RMB 13,600-13,750/mt trading range on Friday.