Market and product

Zinc settled up 0.4% at 113.15 as prices seen supported after China's central bank cut interest rates for the sixth time in less than a year and again lowered the amount of cash that banks must hold as reserves. Earlier, metals had joined buoyant world shares, which were at a two-month peak, in gains after ECB chief Mario Draghi said the bank was ready to adjust its QE programme. Combined zinc inventories in major markets in China, including Shanghai, Tianjin and Guangdong added 11,000 tonnes to 320,000 tonnes this past week.

Guangdong’s zinc stocks increased slightly as smelters delivered goods proactively. Shanghai witnessed a growth in zinc inventories due to nearly 10,000 tonnes of inflows of imported zinc. Zinc inventories in Tianjin fell, though, as some zinc smelters held onto their goods. But the drop is not significant since some imported zinc went from Shanghai to North China. Glencore Plc’s decision to chop back zinc output will probably help to swing the global market into a deficit. ECB president Mario Draghi said on Thursday the bank would maintain current interest rates while not ruling out an expansion of monetary policy.

The bank’s current 60-billion-euro-per-month quantitative easing programme could be expanded at some point in future, he said. The prospect of additional liquidity from the ECB would support risk appetite for commodities but a stronger dollar and rising inventories are likely to crimp any recovery in commodity prices. Technically market is under short covering as market has witnessed drop in open interest by -7.97% to settled at 3314 while prices up 0.45 rupee, now Zinc is getting support at 111.5 and below same could see a test of 109.8 level, and resistance is now likely to be seen at 115.1, a move above could see prices testing 117.

Trading Ideas:
--Zinc trading range for the day is 109.8-117.
--Zinc gains after China's central bank cut interest rates for the sixth time in less than a year.
--Combined zinc inventories in major markets in China, including Shanghai, Tianjin and Guangdong added 11,000 tonnes to 320,000 tonnes this past week.
--Zinc weekly stocks at Shanghai exchange came down by 2317 tonnes.