SMM Lead Market Morning Review (2014-6-12)

SHANGHAI, Jun. 12 (SMM) – LME lead prices overnight managed to hover between USD 2,145-2,150/mt after starting at USD 2,152/mt in Asian trading hours. During European and US trading hours, the World Bank cut its forecast for the global 2014 economic growth to 2.8% from 3.2%, fueling bearish sentiment in base metals markets. Major European and US stock indices also closed with losses across the board. In response, LME lead prices trended down to a trough of USD 2,115/mt, and ended down USD 25/mt at USD 2,117/mt. Traded volumes lost 563 lots to 4,399 lots, and positions gained 296 lots to 127,933 lots. Meanwhile, the latest LME lead inventories held flat at 190,775 mt.

The most active SHFE 1408 lead contract opened Wednesday’s night session at RMB 14,045/mt, and then gradually went up to finish at RMB 14,070/mt, meeting resistance at the 5-day and 60-day moving averages. During the night session, traded volumes for the most active contract were 172 lots, and positions were off 6 lots to 5,466 lots.

The ongoing investigation into fraudulent metals financing at the Chinese port of Qingdao continued to weigh down base metals prices on Wednesday.

It was reported on Tuesday that 22.4% of China’s residential real estate vacancy rate reached 22.4% last year, up 1.8 percentage points from the rate in 2011. Meanwhile, there were RMB 4.2 trillion of housing loans for vacant houses by August 2013. The value of these houses accounted for 34.4% of total assets of families owning vacant houses and 11.8% of total assets of urban families. Following the release of the report, most market participants believed that China’s home prices are slated to fall, presaging a crash for the its property markets. This is expected to add to the bearish sentiment prevailing in base metals markets.

UK ILO unemployment rate fell unexpectedly to 6.6% in the three months to April, and the jobless figure for May also decreased by 27,400. In response, the British pound rose above the 1.6800 mark against the US dollar, but the country’s stock indices failed to rise, with the FTSE 100 Index down 0.41%.

The US dollar index eased 0.01%, and the euro dipped 0.11% against the US dollar. The World Bank’s cut on its outlook for the global economic growth heaped pressure on global stock indices. Most Asia-Pacific shares ended up, but European and US shares dropped on Wednesday. LME base metals prices finished lower across the board.

Investors should pay close attention to zinc prices’s knock-on effect on lead prices on Thurday. LME lead prices are expected to move between USD 2100-2125/mt, and the most active SHFE 1408 lead contract is set to hover between RMB 14,000-14,100/mt. In China’s physical lead markets, traded prices should be largely in the RMB 13,900-14,000/mt range on Thursday.