SHANGHAI, Aug. 4 (SMM) – LME lead prices started last Friday at USD 2,220/mt, and then surged to USD 2,240/mt in Asian trading hours, boosted by China’s encouraging official PMI. During the European and US trading session, the price of the soft metal slumped to USD 2,200/mt, but later rebounded to close up USD 10.5/mt at USD 2,234/mt. Trading volumes shed 72 lots to 5,192 lots, and positions decreased 646 lots to 136,410 lots. LME lead inventories held flat at 215,500 mt.
The most active SHFE 1410 lead contract opened last Friday’s night session at RMB 14,765/mt, and rose to as high as RMB 14,930/mt before ending up RMB 95/mt at RMB 14,875/mt. During the night session, total trading volumes were 68,230 lots, and positions were up by 7,672 lots.
The US Labor Department reported last Friday that the country’s nonfarm payrolls added by 209,000 in July, below the expected 230,000 rise. The US unemployment rate rose slightly to 6.2%, while the wage growth also missed expectations. The worse-than-expected jobs data put a damper on investor sentiment although the nonfarm payrolls increased by more than 200,000 for a sixth straight month. As a result, base metals prices showed relatively weak performance.
Meanwhile, the US July ISM manufacturing PMI came in at 57.1, its highest since April 2011 and beating the reading of 55.3 in June. The sub-indices tracking employment and new orders hit the highest levels since June 2011 and December 2013, respectively.
The eurozone manufacturing PMI slipped fractionally to 51.8 in July, holding steady at a 6-month trough set in June, since continuing expansion in Germany, Spain, and Italy was offset by the contraction in France. France’s manufacturing PMI fell further from 48.2 to 47.8 in July, hitting the lowest level since the beginning of this year and down for the second consecutive month. German manufacturing PMI, however, rebounded in July from an 8-month low of 52.0 to 52.4, above the 50 mark for 13 months in a row. This suggests that German manufacturing activity continued to improve at a slow pace.
China’s official manufacturing PMI climbed to 51.7 in July, its highest in this year, dovetailing the HSBC manufacturing PMI which also hit an 18-month high of 51.7 in July. This indicates that China’s manufacturing activity picked up steadily after the government’s stimulus steps adopted in recent months began paying dividends.
The People’s Bank of China (PBOC) released the Report on Implementation of Monetary Policy for Q2 over the weekend highlighting the priorities of China’s monetary policy. The PBOC stated that the targeted reserve requirement ratio (RRR) cuts may distort the authenticity of figures and undermine the role of markets in deciding cash flows as well as the unity of reserve capital instruments.
The US dollar index eased 0.2%, while the euro rose 0.31% against the greenback. Major world shares fell across the board. LME base metals prices finished lower, except for an small uptick in lead prices.
Lead is expected to fare better than other base metals on Monday even though soft US economic reports, a quake in China’s Yunnan as well as an explosion in Jinagsu’s Kunshan hurt sentiment. LME lead prices are set to hover between USD 2,220-2,240/mt, and the most active 1410 lead contact is projected to move between RMB 14,820-14,920/mt. In China’s physical lead markets, traded prices should be in the RMB 14,650-14,750/mt range on Monday.