SMM Lead Market Morning Review (2014-4-15)

SHANGHAI, Apr. 15 (SMM) – LME lead prices overnight rose above the 40 day and 60-day moving averages after starting at USD 2,086.8/mt, and closed up USD 31/mt, or 1.49%, at USD 2,118.3/mt. Traded volumes shed 3,124 lots to 2,814 lots, positions added 26 lots to 147,952 lots, and LME lead inventories held flat at 202,400 mt.

SHFE 1405 lead contract prices followed LME lead prices up to a high of RMB 13,820/mt after opening at RMB 13,770/mt, and ended up RMB 45/mt at RMB 13,805/mt during Monday’s night session. Traded volumes were 150 lots, while positions were off 6 lots to 21,430 lots.

Ukraine's acting president said Monday he was not opposed to a countrywide referendum on possibly granting regions greater autonomy. However, European countries and the US remained tough and agreed that the third round of sanction may possible be imposed on Russia. With the Ukraine crisis further intensified, market worried the sanctions imposed on Russia may affect its exports, which drove up prices for commodities, including wheat, natural gas, and nickel.

As for economic data, the US retail sales were reported up 1.1% on the month in March, its biggest gain since September 2012 and exceeding the 0.9% forecast, gaining steam primarily from the auto industry. Automobile and auto parts sales also staged the largest growth last seen in September 2012. The Citigroup reported its seasonally-adjusted earning per share at USD 1.3 during the first quarter, higher than the USD 1.14 expected, boosting stocks. The euro zone February factory output matched forecast by rising 0.2% MoM, with January’s data revised from a 0.2% decline to a 1.6% growth.

European and US shares increased across the board. On the London Metal Exchange, lead, zinc and nickel showed strong momentum.

Investors should keep an eye on a slew of European and US economic data due for release on Tuesday as well as the first speech by US Federal Reserve Chair Janet Yellen for this week. Yellen’s speech is expected to be dovish, which should effectively restrain the rebound in the US dollar index and in turn lend support to base metals prices. Meanwhile, the escalating Ukraine crisis should also be watched closely. LME lead prices are set to move between USD 2,105-2,140/mt, and the most active SHFE 1405 lead contract price is forecast to hover between RMB 13,770-13,860/mt on Tuesday. In China’s physical lead markets, traded prices should be mostly in the RMB 13,650-13,800/mt band with the approaching delivery date.