**Abstract**
Core Tip: Stronger-than-expected U.S. housing and consumer confidence data has reinforced expectations that the Federal Reserve may reduce the size of QE3. The U.S. dollar index is on the rise, putting pressure on base metals. Meanwhile, the Shanghai SSE remains flat, with market sentiment showing limited improvement.
[Latest Market Updates]
â— LME Metals: Copper fell to 7,287.5 (-17), Aluminum rose to 1,865.5 (+14.5), Zinc climbed to 1,885 (+15.5), Lead increased to 2,126.2 (+9.7), Nickel dropped to 14,810 (-66), Tin declined to 20,930 (-170).
â— Precious Metals: Gold spot fell to 1,391.6 (-1.43), Silver rose to 22.51 (+0.02), Platinum gained to 1,455.75 (+0.75), Palladium dropped to 748.5 (-1.15).
â— LME Stocks: Copper stock decreased by 5,925 tons, Aluminum stock fell by 9,900 tons, Zinc stock dropped by 250 tons, Lead stock fell by 5,575 tons, Nickel stock increased by 462 tons, Tin stock declined by 20 tons.
â— Shanghai Futures Inventory: Copper inventory fell by 2,102 tons, Aluminum stocks dropped by 597 tons, Zinc stock decreased by 1,435 tons, Lead stock fell by 100 tons.
[LME Analysis & Today’s Forecast]
â— Copper: Weak news flow led to a slight drop in copper prices overnight. The 7,200 level shows strong support. However, low demand from downstream sectors and weak buying interest suggest continued price pressure.
â— Aluminum: Despite a slight rebound in the U.S. dollar index, aluminum closed slightly higher. While the dollar is expected to trend upward, aluminum prices are likely to face resistance and remain under pressure.
â— Lead: Overnight lead prices edged up slightly. A significant drop in LME lead stocks suggests continued support, but external factors have limited the impact on domestic prices, which remain stable.
â— Zinc: A sharp drop in the U.S. dollar helped zinc prices recover from earlier losses. Active buying at lower levels could signal a potential breakout in technical charts. Domestic zinc prices have risen by 100 yuan, suggesting a possible buying opportunity for traders.
â— Tin: Tin prices fell by 0.81% following the IMF's revised growth forecast for China. It broke below the 5-day moving average, with increased trading volume. Prices are expected to test the 20,800 support level in the near term.
◠Nickel: The IMF's downward revision of China’s growth outlook has weighed on the market. Nickel prices showed weaker volatility, with short positions more prominent. A short-term recovery seems unlikely.
[Industry Insights]
â— Global Unwrought Aluminum Inventory: According to the International Aluminum Association (IAI), global unwrought aluminum inventory stood at 1.22 million tons in April, up from 1.238 million tons in March. In April 2012, it was recorded at 1.453 million tons.
Interpretation: Although inventories have decreased, weak downstream demand has not significantly improved the supply-demand balance. This suggests continued downward pressure on aluminum prices in the near term.
◠China’s Refined Zinc Production: In April, refined zinc production in China reached 446,500 tons, a 3% decline from the previous month.
Interpretation: Ongoing weak zinc prices have forced smelters to cut production, leading to a decline in operating rates. As supply decreases, market surplus may ease, potentially leading to a recovery in zinc prices later.
[Financial Highlights]
The Dow Jones fell 106.6 to 15,302.8; Nasdaq declined 21.38 to 3,467.51; Hang Seng Index dropped to 22,554.93; CRB Index rose 0.5 to 531.31; U.S. Dollar Index fell 0.01 to 83.61; EUR/USD rose to 1.2941; USD/JPY fell to 100.98.
[Auditor’s Take on Finance]
◠China’s First Quarter GDP: China’s first-quarter GDP growth came in at 7.7%, slightly below the IMF’s revised forecast of 7.75%. Previously, the IMF had projected 8% and 8.2% for 2013 and 2014, respectively. Many institutions, including Goldman Sachs, have also lowered their growth forecasts. With the new leadership signaling tolerance for slower growth, the metal sector lacks positive momentum.
â— Domestic Demand and Green Consumption: In June 2012, the State Council announced a one-year financial subsidy program for five types of high-efficiency energy-saving appliances, including air conditioners, flat-panel TVs, refrigerators, washing machines, and water heaters. This initiative aims to boost domestic demand, promote green consumption, and encourage energy conservation.
Interpretation: Base metals are widely used in the production of these appliances. The suspension of the subsidy policy may dampen appliance demand, thereby negatively impacting metal demand and prices.
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