Zinc settled -0.78% down at 109.25 tracking LME zinc prices overnight once dipped to USD 2,067/mt as large numbers of shorts sold off goods, and then fluctuated narrowly. Concerns over European debt crisis eased as Spain released drafted budget, while the number of US jobless claims last week decreased to the lowest since July, indicating job markets are improving.

Spanish Cabinet approved the nation's 2013 budget and economic reform package. Under the new budget plan, the government will pass 43 new laws to reform the economy over the next six months, which was designed to end Spain’s debt crisis. In addition, US initial jobless claims dropped 26k to 359k last week, according to the Labor Department.

The results were much better than the market's expectation, helping lift the market sentiment. Durable goods orders tumbled 13% in August, steeper than 5% expected, the biggest drop since January 2009. The US GDP growth for 2Q was only 1.3%, lower than 1.7% expected by market players.

Following S&P’s cut of US credit rating, Egan-Jones announced on September 27th to cut Spanish credit rating from CC+ to CC and put its credit outlook to C. This is the first time for Spanish credit into junk status, which weighed on the euro. Close attention should be paid to HSBC’s China PMI. For today's session market is looking to take support at 108.6, a break below could see a test of 108 and where as resistance is now likely to be seen at 109.9, a move above could see prices testing 110.6.

Trading Ideas:

Zinc trading range for the day is 107.95-110.55.

Zinc dropped as a string of economic data were downbeat in US including August durable goods orders and 2Q GDP final reading

Euro zone economic sentiment defied expectations of stabilisation and again fell sharply in September

Spanish government announced its budget plan for 2013 and its new economic reform plan.