**Abstract**
Core Tip: Overnight U.S. housing and consumer confidence data came in stronger than expected, reinforcing market expectations that the Federal Reserve may reduce the size of QE3. The U.S. Dollar Index surged sharply, putting pressure on base metals. Meanwhile, the Shanghai SSE remained flat, with market sentiment showing only modest 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 slipped to 20,930 (-170).
â— Precious Metals: Gold spot declined to 1,391.6 (-1.43), Silver edged up to 22.51 (+0.02), Platinum rose to 1,455.75 (+0.75), Palladium fell to 748.5 (-1.15).
â— LME Stocks: Copper stocks decreased by 5,925 to 613,725; Aluminum stocks dropped 9,900 to 5,203,150; Zinc stocks fell 250 to 1,095,350; Lead stocks reduced by 5,575 to 225,150; Nickel stocks increased by 462 to 179,832; Tin stocks declined by 20 to 13,875.
â— Shanghai Futures Inventory: Copper inventory fell by 2,102 to 51,909; Aluminum stocks dropped 597 to 243,025; Zinc stock fell 1,435 to 134,651; Lead stock decreased by 100 to 113,912.
[LME Analysis & Today’s Outlook]
â— Copper: Overall news was weak, with copper slightly lower overnight. Support at 7,200 remains strong. Demand from downstream sectors is low, and buying interest is lacking. Prices remain under pressure.
â— Aluminum: After a slight decline in the U.S. dollar index, aluminum closed slightly higher. While the dollar may fluctuate, its overall trend is upward. Aluminum prices are likely to face resistance and may continue to trade in a high range.
â— Lead: Lead rose slightly overnight, with LME lead stocks falling by over 5,000 tons. Support remains, but external factors have limited impact on domestic prices, keeping them stable.
â— Zinc: A sharp drop in the dollar helped zinc recover from earlier losses. Strong buying at lower levels suggests a potential breakout. Domestic zinc prices have risen by 100 yuan, and traders may consider purchasing.
â— Tin: Tin fell 0.81% after the IMF revised China's growth forecast downward. It broke below the 5-day moving average, with trading volume increasing slightly. Expect further testing of the 20,800 support level.
â— Nickel: The IMF's downgrade of China's growth forecast has raised concerns. Nickel showed weaker volatility, with short positions more prominent. A reversal in the short term seems unlikely.
[Industry Insights]
â— Global unwrought aluminum inventory for April stood at 1.22 million tons, revised from 1.238 million tons in March. This compares to 1.453 million tons in April 2012.
Interpretation: Despite a decrease in global aluminum inventories, weak downstream demand has not improved the overall supply surplus. We expect continued downward pressure on aluminum prices in the near term.
â— China's refined zinc production in April reached 446,500 tons, a 3.0% decrease from the previous month.
Interpretation: With zinc prices still sluggish, smelters have adjusted production levels, leading to a decline in operating rates. As supply decreases, the market surplus situation may improve, potentially triggering a price rebound later.
[Financial Highlights]
The Dow Jones fell 106.6 to 15,302.8, Nasdaq dropped 21.38 to 3,467.51, Hang Seng Index fell 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, and USD/JPY declined to 100.98.
[Auditor Reads Finance]
â— China's Q1 GDP Growth: 7.7%
Interpretation: The IMF revised its 2013 and 2014 GDP growth forecasts for China down to 7.75%, from 8% and 8.2% respectively. China’s first-quarter GDP growth was 7.7%. Many institutions have been revising their economic growth outlooks. In mid-May, Goldman Sachs lowered its GDP forecast from 7.8% to 7.6%. With the new leadership showing more tolerance for slower growth, metal prices lack upward momentum.
â— Domestic Demand and Green Consumption:
The Ministry of Finance announced that five energy-saving home appliances, including air conditioners, will no longer be subsidized starting June. To boost domestic demand, promote green consumption, and support energy conservation, the State Council had previously introduced financial subsidies for high-efficiency energy-saving appliances such as air conditioners, flat-panel TVs, refrigerators, washing machines, and water heaters, which were scheduled to last for one year.
Interpretation: Base metals are widely used in the production of these appliances. With the subsidy policy being phased out, demand for household appliances may slow, which could negatively affect metal demand and prices.
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