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SMM Lead Market Morning Review

Release time:2014-11-24

 Nov 24, 2014 02:01 GMT   Source:SMM

 

SHANGHAI, Nov. 24 (SMM) – LME lead started last Friday at USD 2,031.5/mt and then surged to USD 2,075/mt, boosted by the unexpected rate cuts by the People’s Bank of China (PBOC). The price of the soft metal, however, fell back subsequently to close up USD 10/mt at USD 2,045/mt. Trading volumes for three-month lead on the London Metal Exchange gained 3,295 lots to 4,393 lots, but positions contracted 653 lots to 111,216 lots. LME lead inventories shrank 100 mt to 217,025 mt.

Lead for January delivery on the Shanghai Futures Exchange, the most active contract, opened at RMB 13,610/mt in last Friday’s night session, and then advanced to RMB 13,710/mt. The price of the SHFE 1501 lead contract retreated afterwards to end up RMB 100/mt, or 0.74%, at RMB 13,620/mt. Trading volumes for the most active contract totaled 3,884 lots, while positions shed 1,664 lots to 14,096 lots.

The PBOC cut interest rate for the first time since 2012 last Friday, with the one-year lending rate lowered by 0.4 percentage point to 5.6% and the one-year deposit rate by 0.25 percentage point to 2.75%. At the same time, the central bank raised the cap on what banks pay customers on their deposits from 110% to 120% as part of the nation’s liberalization of interest rates. These refreshed moves indicate that the Chinese government is trying to stimulate its slowing economy.

In response, global shares, futures, and metals prices rose markedly. However, the PBOC indicated right after the announcement of interest rate cuts that it will sustain a prudent monetary policy.

European Central Bank (ECB) President Mario Draghi hinted last Friday that the ECB will ramp up its asset purchases should the single currency area’s inflation remain too low for an extended period of time. 

The US dollar index rose 0.69% to a new 4-year high, but the euro slumped 1.19% versus the greenback. Major world shares ended higher last Friday. LME base metals closed with gains across the board.

The PBOC’s interest rate cuts should boost market sentiment on Monday. LME lead is set to hover at USD 2,030-2,060/mt, and the most active SHFE 1501 lead contract is expected to fluctuate at RMB 13,580-13,680/mt. Traded prices on China’s physical lead markets should range between RMB 13,450-13,600/mt on Monday.