US Fed's Rate Cut Exceeds Expectations, LME Zinc Shifts Lower [SMM Zinc Morning Comment]

SMM, Sep 19: Overnight, the US Fed initiated a rate cut cycle with a 50 basis point reduction. The dot plot suggests another 50 basis point cut this year and a further 100 basis point cut next year. Powell stated that the pace of rate cuts could be fast, slow, or paused depending on the situation, and there are no signs of an increased likelihood of recession in the economy. Hezbollah's walkie-talkies exploded in multiple locations, and Iran stated it would hold accountable those responsible for the attack on its ambassador in Lebanon. Hezbollah claimed to have attacked an Israeli military post. US new home starts increased at the fastest pace since April. The State Council of China discussed measures to promote venture capital development and support the listing of eligible scientific and technological enterprises at home and abroad. The Ministry of Foreign Affairs of China decided to take countermeasures against nine US military-industrial enterprises. During the 2024 Mid-Autumn Festival holiday, domestic trips reached 107 million, with total domestic tourist spending amounting to 51.047 billion yuan.
Overnight, LME zinc opened at $2,925/mt. Initially, LME zinc briefly consolidated around the daily moving average before bears increased positions, pushing LME zinc down rapidly to a low of $2,865/mt. It then consolidated around $2,880/mt. During European trading hours, LME zinc rebounded as shorts closed positions, lifting the price to around $2,925/mt, with a high of $2,934.5/mt. Near the night session, increased short positions caused LME zinc to shift lower, fluctuating around $2,890/mt at the close. It ultimately closed down at $2,884/mt, a decrease of $40/mt or 1.37%. Trading volume increased to 15,408 lots, and open interest rose by 307 lots to 242,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the daily K-line shifting lower. LME zinc inventory increased again by 4,750 mt to 251,850 mt, an increase of 1.92%.
Overnight, the most-traded SHFE zinc 2411 contract opened at 23,825 yuan/mt. Initially, bulls increased positions, pushing SHFE zinc above the daily moving average to a high of 23,890 yuan/mt. Subsequently, increased short positions caused SHFE zinc to shift lower to a low of 23,720 yuan/mt. It then slightly rebounded at the close, ending up at 23,840 yuan/mt, an increase of 100 yuan/mt or 0.42%. Trading volume decreased to 38,656 lots, and open interest increased by 4,721 lots to 89,397 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with various moving averages providing support below. The US Fed's 50 basis point rate cut raised market concerns about the balance between a soft landing and recession, causing the dollar to first weaken and then strengthen. On the fundamentals side, consumption improved MoM, long-term supply pressure increased, and the upside space for zinc prices continued to be compressed.