Daily Report 240914 2014-09-24
Macro economy
The U.S. stocks remain a downward trend influenced by conflicts in the Middle East and decline of pharmaceutical stocks which resulted from measures taken by the U.S. government against merger to avoid tax. Three major stock indexes dropped simultaneously. The S & P 500 index was mainly dragged down by necessity consuming stocks. In terms of data, reports released from the federal housing finance agency shows the revised housing price in July rose by 0.1%, lower than the expected value 0.5%. The initial manufacturing PMI index in September is 57.9, which is slightly lower than expected but the upward trend remains. On the whole, the U.S. manufacturing industry is recovering while the growth of real estate market is not steady. Federal Reserve Bank of St. Louis President James Bullard claims as the quantitative easing policy is coming to an end, the Fed should cancel the statement of ‘quite a long time’ in the meeting next month. However, he still holds the attitude that the rate hike will take place at the end of Q1 in 2015.
As for the Europe, the growth rate of Euro Zone manufacturing and service industry in September dropped surprisingly to the low this year. The economy of three major economies in this area did not grow as well. The Euro Zone PMI in September dropped to 52.3, and previously released inflation data was close to a five-year low. The ECB President Draghi declared that the recovering of Euro Zone’s economy is losing its dynamics.
Domestically, the HSBC China Manufacturing PMI index in September released yesterday indicates China’s economy may grow steadily after remaining weak for the last a few months. The PMI index is 50.5, higher than midpoint and expectation. The previous downward trend has been reversed, which means the economy is improving. However, as many indexes released earlier were rather weak, whether the real rebound will take place or not and how much the rebound will be still needs to be seen after further economic stimulus policy is implemented and other data is released.
During late night trading gold price rushed up then fallback, which corrects the decline earlier this week. Influenced by Syria tension, gold price edges up in short term, but it is more likely due to short-term stimulus factors. Overnight money on gold ETF continues to reduce of 1.2 tons. This means currently funds think gold market is more likely to be bearish lately. In the United States, manufacturing and service data in September are both quite strong. However, the housing recovery is still slow, today pay attention to new home sales data in August. Fed might raise interest rate at the end of next year Q1, said by Fed official St. Louis.
In general, though the geopolitical issue may stimulate gold price again, it could not stop overall restriction effect upon gold by increasing the interest rates of the United States. In term of operation, previous short positions at RMB 249.5 high price could be held longer, short term short positions stop profit at RMB 240. Intraday pay attention to the performance at RMB 243 on 5-days moving average.
Domestic silver remains range bound in the night market while the gold rallies. The monthly moving average of silver in the foreign market has dropped below the triangle convergence region. The silver may rebound and offset part of the decrease in early this week, but the weak trend of silver afterwards seems hard to change. Due to the strong demand of domestic silver spot, it still needs corporation of fundamental news for domestic silver to drop below RMB 3,800. However, the spread between domestic and foreign market is likely to enlarge due to continuous weak foreign market. On the whole, considering the special character of silver compared with gold, it will be difficult for the silver to get out of the trend independently.
In terms of operations, previous short positions opened at RMB 4130 could be held. For short-term investors who hold short positions, stop-profit should be set at RMB 3800 and the performance of silver at RMB 3840 should be focused on.
On Tuesday the LME copper market rebound hit resistance then fallback, closed down by $19.5. From the macro perspective, HSBC China PMI is better than expected, but the price index of input and output and employment index are quite low. It suggests that the manufacturing downward pressure is still there. Recently, the Chinese government promised that they would not have large adjustment of monetary policy because of one single index figures. In short term domestic demand may hardly be increased, which is the main pressure of copper.
According to overnight figures, the United States manufacturing industry is well performed. On September Markit manufacturing PMI is 157.9 which is a new high since April 2010. After seasonally adjustment of the United States July housing price index, it increased 0.1% which was 0.3% previously. In addition, German manufacturing PMI in September fell to 50.3 which is the lowest point for 15 months.
Fundamentals, LME backwardation raised $2 to $48, inventory level fell 1600 tons to 152000 tons. Domestic backwardation fell by RMB 30 to RMB 60-200. The risk aversion level of the market is really strong, both trading and investing are thin. Speculators mostly sell out for cash, and the supply is under pressure. Downstream choose to wait and see, they are more willing to buy in with even lower price.
The supply side indicated that in August the amount of smelting enterprises reached the peak of this year. Considering of the high processing fee, smelting enterprises increased production level. This month the production of domestic copper will be greater than 680000 tons in August. It might hammer the copper price. Technically, LME rebound hits resistance, this week it would drop further than $6600 and resistance barrier at $6770. Domestic copper in December would fall over RMB 46800, resistance barrier at RMB 48000.
On Tuesday LME3 month aluminum decreased, closed at $1962.5/ton, drop of 0.77%. The United States and the Arab Allies are going to have air strikes on extremist groups in Syria. On September Manufacturing PMI initial value on Europe and the States are vary. The big four banks deny on cancelling house loan releasing. Nanjing cancelled the purchase restriction on housing. The central bank started 14 days repurchases of 18 billion yesterday.
In respect of industry, customs released alumina oxide and bauxite import figures, Indonesia still has zero import. It would adhere to run of mine ore export ban, said by energy minister of Indonesia. In August global aluminum output besides China is 2057000 tons, which lowered 14000 tons than July. Pay attention to Shanghai aluminum wintin RMB 14000 to 14200. Short term may have long positions.
                                                                                                                   Dong LV (Investment Certificate NO. TZ008452)