SMM Lead Market Morning Review (2014-6-3)

SHANGHAI, Jun 3 (SMM) – LME lead prices initially hovered below the opening mark after starting overnight at USD 2,099/mt, but later recovered early losses to end up USD 30.5/mt, or 1.46%, at USD 2,122.5/mt. Traded volumes added 207 lots to 3,912 lots, while positions shed 255 lots to 130,646 lots. The latest LME lead inventories held steady at 190,475 mt.

China’s official manufacturing PMI released over the weekend rose more than expected to 50.8 in May, up for a third consecutive month, which contributed to a rebound in base metals on Monday. Meanwhile, the country’s policy makers are expected to appropriately lower the reserve requirement for banks that have extended a certain amount of loans to rural borrowers and smaller companies, the State Council announced after a regular meeting led by Premier Li Keqiang.

In the US, Chicago’s manufacturing PMI rose to 65.5 in May, its fresh high since October 2013, while the country’s final manufacturing PMI released by Markit also crept up to 56.4 in the month. US ISM manufacturing PMI advanced to 55.4 during the same period. These encouraging economic reports all pointed to improving manufacturing activity in the US during May. Nonetheless, the country’s building spending growth for April fell to 0.2%, missing the expected 0.6% rise.

In the euro zone, France’s final manufacturing PMI dropped to 49.6 in May, arresting a rising stream through March to April, while the index for Germany also sank to a 7-month low. The single currency bloc’s manufacturing PMI dipped to a 6-month trough during the same period, which should raise hopes of accommodative monetary policy from the European Central Bank.

Most European and US shares closed higher. LME base metals prices finished with gains across the board.

Investors should pay special attention to HSBC’s China final manufacturing PMI for May, the euro zone’s jobless rate for April and CPI for May, as well as US factory orders for April on Tuesday. These economic data will have limited impact on base metals prices, with industry insiders still taking a cautious optimistic stance. LME lead prices are expected to move between USD 2,100-2,130/mt, while the most active SHFE 1407 lead contract is set to fluctuate between RMB 13,970-14,060/mt. In China’s physical lead markets, traded prices should be mostly in the RMB 13,900-14,000/mt range on Tuesday.