SMM Lead Market Morning Review (2014-8-14)

SHANGHAI, Aug. 14 (SMM) – LME lead prices overnight started at USD 2,256.8/mt, and then rose to USD 2,260/mt in Asian trading hours. After a series of economic reports from China, the euro zone, and the US came in negative, the price of the soft metal sank to USD 2,210.3/mt, and ended down USD 49/mt, or 2.17%, at USD 2,212/mt. Traded volumes gained 942 lots to 4,170 lots, and positions added 953 lots to 140,750 lots. LME lead inventories held flat at 215,900 mt.

The most active SHFE 1410 lead contract fell to as low as RMB 14,535/mt after opening Wednesday’s night session at RMB 14,655/mt, and finished down RMB 175/mt at RMB 14,560/mt. Traded volumes for the most active contract rebounded to 30,188 lots, and positions rose by 1,982 lots.

In China, value added at large industrials grew at an unexpectedly slower rate of 9.0% YoY in July. Urban fixed asset investment growth in the first seven months fell to 17%, while increase in retail sales of consumer goods also dropped to 12.2%, missing expectations. National real estate development investment rose in the first seven months at a nominal rate of 13.7% to RMB 5.04 trillion, with the growth down 0.4 percentage point from the first six months. Electricity generated in July increased 3.3% YoY to 504.8 billion kwh, compared to a 5.7% rise in June. New RMB loans hit a refreshed 5-year low in July, while social financing tumbled 86% MoM. These downbeat economic data compounded concerns about a slowdown in the Chinese economy, but also raised expectations for the government to lower interest rates and ramp up stimulus measures to support the economy.

US retail sales stalled in July since automobile demand from the country’s consumers waned and slow wage increases depressed buying. Nevertheless, major three US stock indices still closed higher, boosted by technology stocks.

The US sent 130 more military advisors and announced to oppose any moves to disrupt political process in Iraq. The temporary ceasefire between Palestine and Israel was extended to five days. However, the geopolitical upheavals did not ease markedly and will put a dent in investor risk appetite.

The number of the unemployed in the UK decreased 33,600 in July, a bigger fall than the expected 30,000. The UK ILO unemployment rate for the three months ending in June fell to 6.4%, its lowest since 2008, which pushed up the pound. The ensuing inflation report, however, disappointed investors, while the Bank of England (BOE) cut forecasts for wage increases. BOE President Mark Carney stated that the BOE is not prepared to raise interest rates at present.

The US dollar index rose 0.12%, while the euro ticked down 0.03% against the greenback. Major world shares rose. LME base metals fell across the board, with copper, lead and zinc down by more than 1%.

Base metals markets should continue to digest bearish economic data from China, the euro zone, and the US on Thursday. CPI and GDP reports from major economies are expected to come in negative, which will put a damper on sentiment.

LME lead prices are set to hover between USD 2,200-2,230/mt, and the most active SHFE 1410 lead contract is projected to fluctuate between RMB 14,500-14,600/mt on Thursday. In China’s physical lead markets, traded prices should be in a RMB 14,400-14,500/mt band.