SMM Lead Market Morning Review (2014-6-20)

SHANGHAI, Jun. 20 (SMM) – LME lead prices overnight advanced to USD 2,137.25/mt after starting at USD 2,120/mt, and closed up USD 15.75/mt, or 0.74%, at USD 2,134.5/mt, helped by positive US economic data. Positions fell for a third consecutive trading day.

Despite the upswing in LME lead prices, the most active SHFE 1408 lead contract fell back after opening higher, and ended up RMB 15/mt at RMB 14,015/mt.

The Chinese Premier Li Keqiang revealed during a visit to Britain that the central government would ensure a 7.5% economic growth this year. Meanwhile, the US Federal Reserve signaled at the mid-year interest rate meeting that it would stick to accommodative monetary policy in the long run. In response, base metals prices recouped early losses during European and US trading hours, and went up.

US initial jobless claims for last week were reported at 312,000, below the estimated 314,000. The Conference Board’s leading economic index rose by 0.5% MoM in May, beating April’s 0.4% increase. The Philadelphia Fed’s manufacturing index also jumped to 17.8 in June, faring better than May’s reading and expectations.

Gold prices overnight surged by more than 3%, and silver also soared by nearly 5% to a fresh 3-month high. This was largely attributable to ongoing tensions in Iraq and US Fed Chairwoman Janet Yellen’s denial of an interest rate hike for the near term. In the meantime, China’s government bond reverse repurchase interest rates surged, with GC001 interest rate closing at 15.36%, up 484.03%, triggering concerns over a cash squeeze seen last year.

Most European and US stock indices rose. LME base metals prices closed with gains, except for nickel prices.

Base metals markets should continue to digest optimistic statements made by the Chinese Premier, and a weaker US dollar is also expected to lend some support to the markets on Friday. LME lead prices are set to move largely between USD 2,120-2,150/mt, and the most active SHFE 1408 lead contract is projected to hover between RMB 13,980-14,080/mt. In China’s physical lead markets, traded prices should hold steady in the RMB 13,850-13,950/mt range on Friday.