SMM Lead Market Morning Review (2014-10-22)

SHANGHAI, Oct. 22 (SMM) – LME lead started overnight at USD 2,023/mt, and then slipped to USD 1,991/mt, dampened by disappointing Chinese GDP growth for Q3. During European and US trading hours, the price of the soft metal rebounded to finish up USD 25.3/mt at USD 2,035.3/mt. Trading volumes for three-month lead gained 382 lots to 2,570 lots, but positions shed 943 lots to 120,339 lots. At the same time, LME lead inventories held flat at 224,700 mt.

Lead for December delivery on the Shanghai Futures Exchange, the most active contract, opened Tuesday’s night session at RMB 13,670/mt, and followed LME lead up as high as RMB 13,760/mt subsequently. The price of the SHFE 1412 lead contract ended up only RMB 25/mt at RMB 13,655/mt due to increased selling force.

The European Central Bank (ECB) was reported Tuesday to buy corporate bonds in the first quarter of 2015, helping push up base metals prices. Meanwhile, the ECB acquired short-dated notes from France, Spain, and Italy, which was interpreted as a form of accommodative policy and will expand the central bank’s balance sheet.

In China, Q3 GDP growth, published on Tuesday, beat market expectations even though falling to a refreshed 6-year low of 7.3%. China’s industrial sector continued to grow at a high rate in Q3, but real estate development and investment remained soft despite a flurry of stimulus measures unveiled by the government. China’s retail sales, industrial output, and national fiscal income all posted encouraging growth YoY in September. These positive economic indicators raised hopes of China’s base metals demand and in turn supported prices.

In the US, the National Association of Realtors reported that existing home sales rose 2.4% MoM to 5.17 million units in September, a new 1-year high and above market expectations. US stocks climbed after Apple’s better-than-expected earnings report lifted market sentiment.

Gold and crude oil edged up. Major world shares rose with the S&P 500 up 1.96%. The US dollar index closed up 0.42% at 85.36. LME base metals ended higher across the board, with copper leading gains, up 1.12%.

Against a series of upbeat macroeconomic news, LME lead is expected to move between USD 2,020-2,050/mt, and the most active SHFE 1412 lead contract is set to hover between RMB 13,620-13,720/mt on Wednesday. Traded prices on China’s physical lead markets should range between RMB 13,600-13,750/mt.