SMM Lead Market Morning Review (2014-12-24)

SHANGHAI, Dec. 24 (SMM) – LME lead started Tuesday at USD 1,879/mt and hovered at USD 1,870-1,880/mt in Asian and European trading hours. The price of the soft metal fell at the tail of the US trading session and ended down USD 11/mt at USD 1,858/mt. Trading volumes for three-month lead on the London Metal Exchange shed 1,340 lots to 1,931 lots, while positions gained 1,629 to 113,897. LME lead inventories decreased 25 mt to 220,725 mt on Tuesday.

Lead for February delivery on the Shanghai Futures Exchange, the most active contract, opened at RMB 12,310/mt in Tuesday’s night session and then rose to RMB 12,440/mt due to increased buying. The price of the SHFE 1502 lead contract slid subsequently to move at RMB 12,350/mt and finished up RMB 70/mt at RMB 12,400/mt. Trading volumes for the most active contract totaled 8,358 lots, while positions added 350 to 21,036.

US final GDP growth for Q3, published on Tuesday, came in at 5.0%, well above expectations and the biggest rise in 11 years. This demonstrates rapid growth in the US economy and has soothed concerns over the world’s largest economy. The resulting stronger expectation for the US Federal Reserve to raise interest rates earlier than anticipated sent the US dollar index up sharply above 90, a high not seen since 2006. Non-US currencies and base metals00000, in contrast, were depressed.

The University of Michigan’s Consumer Sentiment Index for December was finalized at 93.6, close to an 8-year high. US consumer spending grew 0.6% MoM in November, the biggest monthly increase in three months.

UK’s final Q3 GDP growth was reported at 2.6% on Tuesday, slightly below estimates. UK current account deficit (CAD) expanded to GBP 27 billion in Q3, running at 6% of GDP not seen since Q3 2013.

The US dollar index edged up 0.41% on Tuesday, while the euro slipped 0.45% against the greenback. Major world shares closed higher. LME zinc rose slightly, but other base metals fell, with tin down as much as 3.61%.

The surge in the US dollar index is expected to pile pressure on base metals prices on Wednesday, but trading should be light for the Christmas Day holiday. LME lead is expected to hover at USD 1,850-1,870/mt, while the most active SHFE 1502 lead contract is set to move at RMB 12,350-12,500/mt. Spot lead prices in China should fluctuate between RMB 12,550-12,700/mt on Wednesday.