Daily Report 101014 2014-10-10
Macro economy
In domestic market, on Thursday, the China Government Network cited Premier Li Keqiang’s speech that people always misunderstand the 7.5% is a bottom line. In fact, the GDP target growth rate is set around 7.5% means slightly higher or lower than 7.5% are both acceptable. Besides, the positive fundamental trend of economy remains and there are plenty of policies to be adopted. Currently, the domestic employment is relatively stable and the growth rate of employment data is better than expected. The income of urban and rural residents continues to be higher than the GDP growth rate. Previously, new reform measures are approved by the state council meeting to promote the rebound of economy. Meanwhile, some of the data in September indicate China’s economy tends to be stable. More data and policies are needed to remain the trend.
Domestic gold remains range-bound during night session. There is pressure around 20-day moving average at RMB 245 in the short term. As for the operations, defensive moves should be prepared at RMB 245 for those previous short positions. During the intraday trading, it is suggested to wait for opportunities after the correction within the region from RMB 239 to RMB 245. The key element which affects the gold this week is the price fluctuation of then USD index and the U.S. stock assets. The U.S. stocks corrected at high level and violent fluctuation took place due to game of funds. The USD index kept dropping for the first three days in this week, but rebounded slightly on Thursday. The employment market rallied as the U.S. initial claims for unemployment benefits last week dropped to an eight-year low. Besides, the Fed officials claim they don’t agree to remain the easing policy for a relatively long time. The rate hike is expected to take place in the middle of 2015. Therefore, the gold price rises to a high level and then falls back. In terms of funds, the gold ETF overnight remains flat while the positions kept shrinking since the middle of September, which indicates the funds are not holding an optimistic view of the gold. On the whole, since the gold is close to a important supportive price at RMB 1180 in the foreign market, the gold is likely to rebound in the short term. However, the weak trend will remain due to high downward pressure.
The domestic silver hit a high level during the night trading and then dropped back. The fluctuation of silver is more violent than that of gold. In terms of operations, defensive moves should be prepared at RMB 3850 for those previous short positions. For short-term investors, long positions around five-day moving average at RMB 3820 could be held. However, the upward momentum seems slightly insufficient. Stop-loss should be set at RMB 3800 and stop-profit should be set at RMB 3850 and RMB 3900 respectively. After the silver is oversold in the foreign market, the rebound momentum of silver is marginally stronger than the gold. Domestic silver recently falls close to the support line at RMB 3710. Part of previous decline and the backwardation may be slightly corrected in the short term.  
On Thursday, LME copper continued to rally, but it was blocked by 20-day moving average at $6750 then fell afterwards, closed up $56.5. The U.S. stock market crash and the dollar being supported hammered the copper market. German exports in August had a sharp slump since January 2009. The whole market has a even greater concern over the global economy. The U.S. first time jobless claims are 287000 people which is lower than the expected figure. It is the first time the figure lower than 300000 people for straight 4 weeks since the beginning of 2006; thereby it seems the U.S. employment is in good condition. Overall, the global economic recovery is weak; the copper market is short for sustained rebound momentum.
When comes to fundamental aspect, the LME spot premiums raise $8 to $57; inventories inched up 300 tons to 150000tons. Domestic spot price is in between just the spot price to premium of RMB 100. After holidays, shippers sell out spot at the price their idea price; dealers buy in according to the demand of long-term orders; the downstream increased their buy in volume, therefore the market trading and investing warmed up.
From the supply side, recently polish Sierra la Gorda project put into production, the first session of the copper output will reach 120000 tons, the second session will be around 237000 tons, this year it plans to produce 73000 tons of copper. Add up with Ministro Hales which started to produce from last year, in total they will produce 183000 tons of copper this year; as well as Caserones copper, the branch of Japan JX group which put into production in the beginning of June this year, it plans to produce 68000 tons of copper this year. Hence copper concentrate production release the trend will continue. Overall, after the recent declining, copper is in good support at the support point $6600 since 2006; copper will test the strength of the rebound, in short-term we suggest to set the resistance barrier on 5-week moving average at $6745.
On Thursday, PP futures opened at low price with fluctuation. It opened at RMB 10020 and closed at RMB 10025. The trading volume declined 51370 lots to 176000 lots. The holdings increased 5478 lots to 197000 lots. Last night upstream propylene price is quite stable. From the basic devices, shutdown will not lead to huge difference on the capacity. In terms of spot, among the most markets PP price is slightly loose on yesterday; volatility is around RMB 50-100 per ton. PP futures opened in a low price followed with low trend, which hammered the market even worse.
Most people are active on shipment, slightly on sale makes the selling as the priority; the downstream buy in according to the production, but they prefer lower price. People intend to wait and see the market; less trade was taken into action. Like wire drawing, today's mainstream of north China bid in RMB 10750-11000 per ton, east China mainstream quotation in RMB 11000-11300 per ton, south China mainstream quotation in RMB 11000-11150 per ton. Overall, today's prices have a sharp fall, the MACD green column to spread again; the current prices are above 10000 integer bit.  Fundamentals remain weak in the mid-term; band operators can still be considered band shorting.
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