SHANGHAI, Aug. 8 (SMM) – LME lead prices overnight started at USD 2,247/mt, and then hovered steadily above USD 2,240/mt during the Asian trading session. The price of the soft metal fell subsequently to USD 2,219.8/mt, dampened by disappointing German factory output growth, and rebounded to close up USD 23/mt at USD 2,261/mt. Trading volumes for the three-month lead gained 1,148 lots to 5,759 lots, and positions shed 330 lots to 138,960 lots. LME lead inventories added 250 mt to 215,900 mt.
Lead for October delivery, the most active contract, opened Thursday’s night session at RMB 14,770/mt, and then tracked LME lead prices up to RMB 14,870/mt, closing at RMB 14,805/mt. During the night session, trading volumes for the SHFE 1410 lead contract totaled 53,872 lots, and positions expanded 870 lots to 37,266 lots.
The intensifying geopolitical crisis in Ukraine was once again under the spotlight on Thursday. Russia has announced bans on food imports from the US and some European countries in retaliation against their sanctions over Ukraine. Meanwhile, US Deputy Treasury Secretary responded that the US is prepared to unveil a new round of sanctions on Russia should it continue to supply funds to separatists in eastern Ukraine. Following these sanctions, US exports to Russia tumbled 34%, while its imports from Russia have also declined for a third month. Russian bans on food imports from the US and the 28 European Union countries are expected to further push up Russia’s inflation. As a result, European and US stocks closed lower across the board.
The European Central Bank (ECB) overnight put its refinancing rate on hold at 0.15% in view that the euro zone’s economic recovery is still at an early stage. ECB president Mario Draghi stated in the ensuing press conference that inflation in the single currency area remained persistently below the 2% target and the ECB is mulling ABS and QE. The Bank of England also kept its benchmark interest rate unchanged at 0.5% and maintained the size of its bond-buying program at 375 billion pounds.
German factory output grew 0.3% in June from May, missing the expected 1.3% rise. The German Economy Ministry revealed that the country’s sluggish construction sector was largely a result of increasing concerns over the Ukraine crisis.
US initial jobless claims for the week ending August 1 were reported at 289,000, fewer than the estimated 304,000. The jobless claims averaged 295,300 for the past four weeks, hitting a refreshed low since February 2006, indicating the US jobs market is gaining momentum.
The US dollar index rose 0.11%, while the euro fell 0.14% against the greenback. LME base metals closed higher, except for zinc down more than 1%.
A series of positive US economic reports, published on Thursday, should give a boost to base metals markets on Friday, but investors should pay attention to developments of the Ukraine crisis. China’s trade data for July should be made public on Friday as well.
LME lead prices are forecast to fluctuate between USD 2,250-2,280/mt, and the most active SHFE 1410 lead contract is set to hover between RMB 14,750-14,850/mt. In China’s physical lead markets, traded prices should be in the RMB 14,600-14,750/mt range on Friday.