SMM Lead Market Morning Review (2014-4-30)

SHANGHAI, Apr. 30 (SMM) – LME lead prices overnight dipped to USD 2,100/mt at some point after starting at USD 2,126/mt in Asian trading hours, testing support at the 20-day, 60-day moving averages and the USD 2,100/mt mark. Boosted by strength in European and US stocks, the metal rebounded subsequently to close down USD 4.5/mt, or 0.21%, at USD 2,114.75/mt. Traded volumes gained 399 lots to 5,018 lots, positions added 400 lots to 13,381 lots, and LME lead stocks held steady at 192,975/mt.

No transactions were reported for the most active SHFE lead contract during Tuesday’s night session, with only 50 lots of total traded volumes as against around 1,000 lots since the night session was unveiled.

In the euro zone, despite higher consumer confidence index, economic confidence index dropped to 102 in April, its first decline in a year. Germany’s CPI rose 1.3% in April, below the 1.4% forecast. In the US, the Case-Shiller’s 20-city home price index advanced 12.9% YoY in February, the lowest growth since last August and falling short of the 13% expectation. UK’s GDP grew 3.1% in the first quarter, its biggest rise since Q4 2007, but was slightly lower than the 3.2% rise economists had expected.

As for the situation in Ukraine, the EU imposed new sanctions to 15 Russian officials, including Russian Deputy Prime Minister Dmitry Nikolayevich Kozak, Minister for Crimean Affairs Oleg Genrikhovich Savelyev and Deputy Chairman of State Duma Ludmila Ivanovna Shvetsova, raising the number in its sanction list to 48. The EU said it had imposed travel bans and assets freeze on these officials.

China saw a series of events influencing the market. The Housing Administration Bureau of Nanning announced to loosen restrictions on house purchases in some regions in Guangxi, including Beihai, Fangchenggang, Qinzhou, Yulin, and Chongzuo, which is considered a prelude to an easing of purchase restrictions on residential real estate.

The People’s Bank of China said some investment products should be allowed to fail in an orderly way in its annual Financial Stability Report, provided that the risks are under control.

The Shanghai Stock Exchange issued a draft on cross-border stock trading plan it recently unveiled for public comments, stating that the quota for cross-border investments would be counted on a net-buying basis, meaning the capital flows in the markets will be much bigger than initially thought, which will benefit stock markets.

The PBOC drained RMB 50 billion from the market via 28-day bond repurchases Tuesday. Considering the RMB 141 billion due to mature this week, a net RMB 91 billion will be injected in the market, as compared to the RMB 2 billion net injection last week.

The latest US economic data failed to offer clear guidance for financial markets, while the US Fed Chair Janet Yellen is also not scheduled to hold a press conference after the interest rate meeting. In this context, the Fed is expected to dial back further by USD 10 billion from its monthly bond buying program. Meanwhile, investors should keep an eye on US Q1 GDP, ADP jobs report for April and the euro zone’s inflation data. LME lead prices should be affected by a series of risk events Wednesday, but will be subdued by risk aversion sentiment in Asian trading hours.

LME lead prices are expected to move between USD 2,100-2,135/mt, while the most active SHFE 1405 lead contract is set to hover between RMB 13,800-13,880/mt on Wednesday. In China’s physical lead markets, traded prices should be largely between RMB 13,800-13,900/mt in the last trading day before the May Day holiday.