SMM Lead Market Morning Review (2015-5-14)

SHANGHAI, May 14 (SMM) – LME lead moved higher to USD 2,079.5/mt after opening at USD 2,057.5/mt during Asian trading hours, but met resistance at the 10-day moving average to fall back. LME lead dived to USD 2,015/mt during European trading hours as German Q1 GDP fell short of forecast and as most US economic indicators were poor. LME lead was last down USD 31.5/mt or 1.53% at USD 2,027.5/mt. Trading volumes decreased 722 to 4,672 lots while positions climbed 1,113 to 155,830.

SHFE 1507 lead started at RMB 13,580/mt Wednesday night and dropped to RMB 13,405/mt responding to falling LME lead, to end at RMB 13,455/mt, slipping RMB 35/mt or 0.26%. The contract fell below the 5-day moving average on profit-taking.

Indicators were sluggish yesterday. China’s April manufacturing output, investment and retail sale were below expectation and growth in M2 hit a new low. China’s January-April fixed asset investment (excluding farmers) rose 12%, versus January-April 2014, but dropped 1.5% compared with January- March, a new 4-year low. Mainland M2 balance was up 10.1% YoY but growth was 1.5% and 3.1% slower than March and April 2014 respectively. Growth in aggregate financing posted a RMB 188.1 billion and RMB 448.8 billion decline versus March and April 2014. Thus, poor data weighed on base metals.

In euro zone, preliminary Q1 GDP rose 0.4% on the quarter with Q4’s growth 0.3%, and 1% QoQ with Q4’s 0.9%, both in line with forecast. Though March manufacturing output was below expectation, European QE program helped recover economy. US April retail sale remained unchanged on the month but only climbed 2% excluding auto and petrol ones, both below market estimate, strengthening expectation for US Fed’s late interest rate hike. In response, US dollar index hit a 3-month low and euro was favored.

NYMEX crude oil dropped slightly as concerns over global oil oversupply offset the influence of drop in US oil stocks higher than estimate last week. Gold price ended up 2.2% at USD 1,218.2/Oz. European and US stocks all fell. LME base metals were mixed.

LME lead may move at USD 2,010-2,050/mt. SHFE 1507 lead should hover between RMB 13,400-13,500/mt and spot lead RMB 13,600-13,750/mt.