SMM Lead Market Morning Review (2014-6-27)

SHANGHAI, Jun. 27 (SMM) – LME lead prices overnight started at USD 2,173.3/mt, and then advanced to as high as USD 2,182/mt during Asian trading hours. During European and US trading hours, the metal fell back to USD 2,160/mt, due to soft US spending and fears of an interest rate hike, but later recovered losses to close up USD 8.8/mt at USD 2,177/mt. Trading volumes decreased 1,905 lots to 3,428 lots, but positions added 1,364 lots to 129,024 lots. Meanwhile, the latest LME lead stocks fell 275 mt to 191,900 mt.

Prices for the most active SHFE 1408 lead contract hovered largely between RMB 14,085-14,170/mt after opening Thursday’s night session at RMB 14,150/mt, and finished up RMB 15/mt at RMB 14,140/mt. Trading volumes for the most active contract totaled 270 lots, and positions gained 134 lots to 7,238 lots.

US private consumption grew by 0.2% in May from a month ago, missing expectations for a 0.4% rise but higher than the preliminary reading of a 0.1% fall. The consumption growth for April was revised to zero. After being adjusted for inflation, US consumer spending declined for two months in a row, and is not expected to improve significantly in the second quarter, with the country’s economy suffering the worst performance in five years during the first quarter. Nevertheless, US May deflator for personal consumption expenditures (PCE) was reported at a refreshed 19-month high of 1.8% YoY. The country’s initial jobless claims for last week dropped 2,000 to 312,000, higher than forecasts.

Federal Reserve Bank of St. Louis President James Bullard indicated on Thursday the US Federal Reserve should raise interest rates starting at the end of the first quarter of 2015. He argued that the US labor market is growing at a faster pace than expected and that a series of economic reports all point to a sturdy recovery in the country’s economy. In response, the US dollar index and stocks encountered downward pressure.

Meanwhile, leaders of pro-Russia separatists in eastern cities of Ukraine agreed to start a new round of peace talk on Friday, which is expected to extend the present cease fire due to expire on the same day. This move will help ease market angst over geopolitical uncertainties.

The euro fell by 0.12% against the US dollar. The US dollar index remained unchanged. Most European and US stocks closed lower. LME base metals prices rose slightly, except for a fall in tin and aluminum prices.

Base metals prices should fluctuate largely at high levels on Friday. LME lead prices are set to hover between USD 2,160-2,180/mt, and prices for the most active SHFE 1408 lead contract are expected to move between RMB 14,080-14,180/mt. In China’s physical lead markets, traded prices should be in the RMB 13,850-14,000/mt range on Friday.