March 27 SMM Zinc Market Morning Report

2015-03-27

SMM March 27: Yesterday, market news was mixed, with significant selling pressure on LME zinc, leading to a price surge followed by a decline. After opening at $2080 per ton, LME zinc traded narrowly around the opening price during the Asian session. During the European and US sessions, boosted by the rise in crude oil and gold in surrounding markets, LME zinc rapidly surged to a five-week high of $2128.5 per ton. However, the market's response to the crude oil price increase was limited, with high crude oil inventories remaining a concern for investors. In addition, strong US initial jobless claims data in the evening boosted the US dollar, causing LME zinc to give up its intraday gains and fall back to near its opening price. It closed at $2081 per ton, down $1.5 per ton, or 0.07%.

SMM March 27: Yesterday, market news was mixed, with significant selling pressure on LME zinc, leading to a surge and subsequent decline. After opening at $2080 per ton, LME zinc traded narrowly around the opening price during the Asian session. During the European and US sessions, boosted by crude oil and gold in surrounding markets, LME zinc surged rapidly to $2128.5 per ton, a five-week high. However, the market's response to the crude oil boost was limited, with high crude oil inventories remaining a concern for investors. Coupled with the positive US initial jobless claims data in the evening, which boosted the dollar, LME zinc gave up its intraday gains and fell back to near the opening price, closing at $2081 per ton, down $1.5 per ton, or 0.07%. Trading volume increased by 5221 lots to 13298 lots, open interest increased by 3732 lots to 289063 lots, and inventories decreased by 50 tons to 520125 tons. Today's focus will be on China's January-February industrial profits of large-scale enterprises and the US Q4 GDP data in the evening. According to the Land and Resources Bulletin, there will be news on the housing market, triggering market expectations of policy stimulus for the property market, which may boost sentiment. Selling pressure on LME zinc is significant, and upward momentum is hampered.

Overnight, the main SHFE zinc contract (1506) opened higher and closed lower, opening at 16030 yuan/ton. It briefly surged to 16075 yuan/ton before falling back and consolidating between 15990 and 16020 yuan/ton, eventually closing at 16010 yuan/ton, up 40 yuan/ton or 0.25%. Trading volume increased by 11336 lots to 48670 lots, and open interest decreased by 886 lots to 124364 lots. The 16000 yuan/ton level for the main SHFE zinc contract (1506) saw intensified long-short trading. Although the market may speculate on the statements from the Ministry of Land and Resources, it is possible that risk aversion before the weekend will put pressure on zinc prices, leading to a reversal of gains.

Saudi Arabian warplanes bombed Yemen, and a ground offensive may be necessary. The renewed conflict in the Middle East has spread risk aversion throughout the financial markets, causing a sharp rise in gold and oil prices. Base metals initially surged on this, but the strength of the dollar prevented the rally from lasting, and LME base metals fell back, closing with mixed results. Global stock markets fell broadly due to the strong risk-off sentiment.

US initial jobless claims fell to 282,000 last week, a five-week low and below expectations, indicating continued improvement in the labor market; the March Markit PMI also exceeded expectations. Several important US data releases are scheduled for next week, amplifying the impact of sensitive data on the market beforehand. In addition, statements from Federal Reserve officials yesterday clearly showed a hawkish stance. Atlanta Federal Reserve Bank President Lockhart said that the strengthening US economy means that the Fed meeting in the summer may announce a rate hike, and that rate hikes are possible at the three subsequent rate-setting meetings. It is worth noting that Lockhart has voting rights on the Federal Open Market Committee this year. St. Louis Federal Reserve Bank President Bullard also reiterated his previous view on Thursday that interest rates should rise soon, and that the risks of keeping interest rates at near-zero levels for too long are significant. Bullard does not have voting rights on the Federal Open Market Committee this year. The improved data and hawkish comments led to a rebound in the dollar, which closed higher, putting pressure on metal markets.

This morning, China will release data on industrial profits for February. As the market has already fully expressed pessimistic sentiment regarding January-February, pessimistic data may not put significant pressure on the market. The market is paying attention to a Weibo post from the official Weibo account of the China Land and Resources Bulletin yesterday, stating that important news regarding real estate is expected to be released in the next two days. External expectations for government policies to stabilize the property market are further rising, and this may provide support for metal markets today.

The US dollar index rose 0.48%, the euro fell 0.77% against the dollar; major global stock markets mostly fell; LME base metals surged and fell back, with mixed results.

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