SMM Lead Market Morning Review (2015-2-6)

SHANGHAI, Feb. 6 (SMM) – LME lead overnight started at USD 1,862/mt and then hovered steadily around USD 1,855/mt in the Asian trading session. During European and US trading hours, the price of the soft metal rallied briefly to USD 1,868/m, boosted by a weaker US dollar and a rebound in crude prices, but fell at the tail of the trading to end down USD 14/mt at USD 1,850/mt. Trading volumes for three-month lead on the London Metal Exchange gained 129 lots to 3,716 lots, while positions shed 589 to 119,400. LME lead inventories increased 275 mt to 214,575 mt on Thursday.

Lead for April delivery on the Shanghai Futures Exchange, the most active contract, closed up RMB 40/mt in Thursday’s night session, with trading volumes totaling only 872 lots.

The European Commission raised its forecast for the euro zone’s GDP growth from 1.1% to 1.3% for 2015 and from 1.7% to 1.9% for 2016 on Thursday. The commission indicated that the single currency area’s inflation is forecast to be minus 0.1% this year before boucing back to 1.3% in 2016.

US initial jobless claims for the week ending January 31 were 278,000, lower than 290,000 expected, indicating a sustained recovery in the labor market. The country’s trade deficit hit a refreshed 2-year high of USD 46.6 billion in December, well above USD 38 billion expected. The trade deficit for November was revised up from USD 39 billion to USD 39.8 billion. The US Commerce Department indicated that falling crude prices, a strengthening dollar and a robust economy all contributed to the rise in the deficit.

Boosted by the encouraging labor market and optimism towards the euro zone’s economic growth, US benchmark oil prices surged 4% to rise above USD 50/bbl on Thursday. Meanwhile, Saudi Arabia hiked the price of its oil sold to the US buyers for the first time in recent several months, giving a boost to oil prices. As a result, base metals prices rebounded in tandem with crude prices late on Thursday, with LME copper recouping all losses in the daytime trading session.

The People’s Bank of China (PBOC) pumped RMB 30 billion by conducting the reverse repurchase agreement on Thursday, taking the net liquidity injection to a total of RMB 90 billion this week.

The US dollar index fell 0.91%, while the euro surged 1.21% versus the dollar. US stocks closed higher, with the Dow up over 1%. European stocks were mixed. LME lead and nickel fell, but other base metals all rose on Thursday.

LME lead is expected to hover between USD 1,835-1,870/mt, while the most active SHFE 1504 lead contract is set to fluctuate between RMB 12,500-12,620/mt on Friday. Spot lead prices in China should remain unchanged at RMB 12,500-12,650/mt.