Zinc settled up 1.69% at 129.65 as support seen after data showed that manufacturing activity in the euro zone continued to recover in December. HSBC's December PMI for China was finally 50.5, expanding for the fifth straight month, which boosted LME zinc prices to USD 2,080/mt.  But US Markit manufacturing PMI in December was upbeat, pushing up the US dollar index to rebound and weighing down LME zinc prices to roll back most early gains.

The HSBC China manufacturing PMI for December was finalized at 50.5, on par with the preliminary reading and touching a three-month low.  However, the index has remained above 50 for a fifth month straight, a sign of continued expansion of Chinese manufacturing.  New export orders sub-index fell below 50 for the first time in four months to 49.1, due to waning demand overseas during the Christmas and New Year period.  As the lower index was primarily attributable to seasonal factor, metals markets were little affected and staged continuous rises during Asian trading hours, an indication that investors were still optimistic on Chinese manufacturing.

The People's Bank of China still conducted no open market operations this week, draining a net RMB 29 billion from the market as the reverse repo was due to mature.  Although the New Year holiday and suspension of PBOC's open market operations lately upset the market, liquidity conditions improved some helped by fiscal deposits and due to completion of year-end regulatory review of banks' loan-to-deposit ratio.  Technically market is under fresh buying as market has witnessed gain in open interest by 3.8% to settled at 3166 while prices up 2.15 rupee, now Zinc is getting support at 128.6 and below same could see a test of 127.4 level, And resistance is now likely to be seen at 131, a move above could see prices testing 132.2.

Trading Ideas:

Zinc trading range for the day is 127.4-132.2.

Zinc prices gained as support seen after data showed that manufacturing activity in the euro zone continued to recover in December.

Data showed that China's final HSBC Purchasing Managers Index inched down to 50.5 in December from a reading of 50.8 in November.

US Markit manufacturing PMI in December was upbeat, pushing up the US dollar index to rebound, limiting the upside for metals prices