Daily Report 100914 2014-09-10
Macro Economy
The U.S. stocks dropped yesterday due to the rising concerns that the rate hike may be sooner than expected. The S & P 500 index decreases by 0.65%, which is the highest decline in the recent month. The Apple’s shares rose to a high level during the intraday trading and then dropped down, holding back the stock market as well. The U.K. industrial production growth rate in July is higher than that in June. The Bank of England governor Carney claims that the rate hike is likely to take place in next spring resulting from the increasing growing wages and economy. Although the U.K. economy turns to be positive, the Scotland independent issue still cast a cloud over the U.K. economy. It is said that the ECB president Draghi has asked the European governments for help to adopt the ABS purchasing project. However, the response so far has been disappointing. The plan that European governments will guarantee for securities bought by the ECB failed, indicating disagreements in the EU toward the new stimulus policy.
Domestically, Premier Li Keqiang declared in the Davos Forum yesterday that till August, the Chinese urban employment data is close to this year’s target. Therefore, targets of the main economic data could be reached. Issuing more currency to boost the economy will not be an option. Sound monetary policy and directional macro-control should be stuck to. The market should boosted by power of reform but not strong stimulation. The speech indicates that stimulus policy expected by investors is not likely to take place in a short term. Besides, People’s Bank of China is going to release the RMB new loans data in August. It is highly suggested to pay attention to this data.

The domestic gold fluctuated and decreased slightly in the night market, dropping below the bolster of RMB 249.5. In terms of operations, if the trading volume is small, short positions opened at RMB 251 and RMB 249.5 could be closed at RMB 247. Short positions opened at RMB 256 could be held. Opening more short positions is not recommended during the intraday trading. Securing the profits should be the first priority. Defensive moves should be prepared for the short-term rebounding risk. The gold is believed to remain a downward trend. The U.S. JOLTS reports in July indicate the weak employment market is recovering, which offsets the concerns raised from the relatively low non-farm payrolls. The expectation that the Fed will increase the rate hike guidance is strengthened. Facing the pressure, the gold then dropped. The U.S. stocks are likely to pull back as well. It is recommended to concentrate on funds’ readjustment toward assets allocations. The gold ETF positions remain unchanged for the last 5 days, demonstrating funds are cautious toward the gold and there is no further significant reduction on positions.    

The domestic silver dropped in the night market following the trend of gold. However, the decrease is not as much as that of gold. In terms of operations, pay attention to the support performance at RMB 4080. Investors could have short selling if the trading is weak. Part of the stop-profit moves could be taken at RMB 4050. Previous short positions opened at RMB 4130 could be held. Trends remain bearish. The supply of silver spot is tight and fluctuating according to yesterday’s stocks index futures. After a continuously increasing trend for days, the stocks index futures are facing a short-term technical pullback. However, a hard landing for the economy is not likely to happen, with the financing costs decreasing and directional easing policy being expected to take place. Although the weighted stocks performed flat yesterday, the aerospace stocks are rather active. The real estate industry seems to recover in the short term, but further trend of the real estate industry still needs to be seen. Previous silver long positions could be held but it is recommended to consider carefully before opening new long positions.

On Tuesday, copper market has a slump of $137. Overnight non-ferrous markets fell broadly, including LME nickel fell by more than 5%, zinc dropped by more than 3%. It is clearly that non-ferrous rally has come to an end. Data indicated that previously China economic growth is slowing down, and the trade data showed that Chinese copper imports has a straight decline. It aggregates the concern towards the demand of copper. The Year employment goal has been achieved recently, but directional control is still needed in the future. And reform is still the fundamental to stimulate the market vigor, announced by Li keqiang the Chinese prime minister. Hence, China may hardly publish new stimulus policies. Focus on China’s inflation and new loans data, which are going to be released on Wednesday. Also, focus on the macro data which is going to be released on Saturday.
Fundamentals, LME spot premium edged up to $7 to $17, inventory level increased slightly of 100 tons to 155000 tons. On Tuesday, domestic copper spot has a sharp callback, premium dropped by RMB 60 to RMB 20-200. Though it is really close to the switch of copper main contract, spot market is still thin. The supplier is continually lower the premium, but the market appears really thin. The downstream rarely gets into the market.
From the consumption perspective, there are 76% copper alignment poles manufactories believe that the orders on September would not markedly improve. There is a sign of wire and cable industry that a number of smaller business bankrupt. Moreover, enterprises have pressure on collecting their funds back. Signs of slack season began to emerge. Technically, LME copper broken rebound since March at $6900 of support line. If the resistance is effective, copper price will continue to test $6821. And it is more likely down to $6600. Domestic copper broken long term support line RMB49000. If the resistance is effective, it will continue to test RMB 48400 and 46800.                                                                              
                                                                                              Dong LV (Investment Certificate NO. TZ008452)