SHANGHAI, Aug. 22 (SMM) – LME lead overnight slipped to USD 2,238/mt after starting at USD 2,250/mt, weighed down by the worse-than-expected HSBC’s China flash manufacturing PMI for August. During European and US trading hours, the price of the soft metal surged initially, but fell subsequently to close down USD 9/mt, or 0.4%, at USD 2,246/mt, finding support at the 20-day moving average. Trading volumes added 315 lots to 3,876 lots, and positions shed 1,654 lots to 130,615 lots. Meanwhile, LME lead positions gained 1,600 mt to 217,200 mt.
US initial jobless claims for the week ending on August 15 came in at 298,000, fewer than the expected 300,000, while continuing jobless claims fell to the lowest since June 2007. The nation’s Markit preliminary manufacturing PMI hit a 4-year high of 58, with all sub-indices up from July, indicating strong performance in the manufacturing sector. These upbeat economic figures boosted US stocks, but also fueled concerns over an earlier-than-anticipated interest rate hike by the US Fed. Kansas City Fed President Esther George warned that investors should not get too comfortable in the belief that Federal Reserve interest rate hikes are a long way off.
In contrast, a series of economic reports from the euro zone were disappointing. The single currency area’s manufacturing PMI slid in August to 50.8, the lowest since July 2013, while its composite PMI dropped unexpectedly to 52.8. France manufacturing PMI fell further in August to a 15-month low of 46.5, but its composite PMI rebounded to 50.
European and US stock indices rose across the board. LME base metals, except copper, pulled back following a rally.
US Federal Reserve Chair Janet Yellen is slated to deliver a keynote speech on the labor market at the annual Kansas City Federal Reserve meeting late on Friday. The speech is expected to provide guidance for market participants on the US Fed’s monetary policy.
LME cash-to-three-month lead spread has shifted from a USD 12/mt contango to a USD 8/mt backwardation, in a sign of tightening supply, which should give a boost to lead prices.
LME lead will continue to test support at the 20-day moving average on Friday and move largely between USD 2,230-2,255/mt. The most active SHFE 1410 lead contract looks set to edge lower to a RMB 14,540-14,650/mt band.
In China’s physical lead markets, a large number of battery producers have curtailed production as a result of high costs. The resultant slower demand will cause spot lead to fare even worse than SHFE lead to trade at RMB 14,350-14,450/mt on Friday.