SMM Lead Market Morning Review (2015-2-27)

SHANGHAI, Feb. 27 (SMM) – LME lead overnight started at a low of USD 1,750/mt, but later edged up to USD 1,760/mt in the Asian trading session. During European and US trading hours, the price of the soft metal surged to as high as USD 1,778/mt due to a series of positive economic indicators, but surrendered some gains afterwards to end up USD 8/mt at USD 1,760/mt. Trading volumes for three-month lead on the London Metal Exchange shed 28 lots to 3,748 lots, while positions decreased 369 to 122,232. LME lead inventories fell 100 mt to 213,650 mt.

Lead for April delivery on the Shanghai Futures Exchange, the most active contract, opened at RMB 12,275/mt and then fluctuated between RMB 12,250-12,320/mt before finishing up RMB 15/mt at RMB 12,270/mt in Thursday’s night session. Trading volumes for the most active contract totaled only 646 lots.

US durable goods orders, published on Thursday, soared 2.8% MoM in January, well above a 1.6% rise expected. During the same period, the country’s CPI declined 0.7% MoM due to sliding crude prices. However, the so-called core CPI, which excludes food and energy prices, rose 0.2% MoM, beating expectations.

San Francisco Fed President John Williams indicated that he expects the US to reach full employment by the end of this year and the US Federal Reserve to raise rates “sometime this summer, or this fall” if the economic data come in as expected. The comments sent the US dollar index sharply higher to stand above 95 on Thursday, but caused base metals prices to give up gains.

The GfK institute reported on Thursday that Germany’s forward-looking consumer confidence index rose to a 13-year high of 9.7 in March, above expectations and February’s reading. The country’s seasonally adjusted unemployment remained at a record low of 6.5% for a third straight month in February. These inspiring economic indicators boosted growth expectations for the largest European economy. Meanwhile, the euro zone’s economic climate index was 102.1 in February, beating expectations and hitting its highest since July 2014.

Crude prices rose sharply on Wednesday following comments by Saudi Arabia that crude demand is growing and assertion by the International Energy Agency (IEA) that low crude prices are short-lived. However, investors were still much concerned by record US crude oil inventories, leading to a 5.5% tumble in crude prices on Thursday.

The US dollar index jumped 1.17%, while the euro slipped 1.47% versus the greenback on Thursday. European and US stocks rose across the board. LME tin dropped slightly, but other base metals closed higher, with copper up as much as 1.74%.

LME lead is expected to hover narrowly between USD 1,745-1,775/mt on Friday against a strong US dollar. The most active SHFE 1504 lead contract is set to move between RMB 12,220-12,320/mt, while spot lead prices in China should trade between RMB 12,350-12,450/mt.