Daily Report 011214 2014-12-01
Macro Economy

Both crude oil and gold prices fell, focus on Chinese PMI today. S&P 500 index dropped last Friday. Influenced by the decision of Organization of Petroleum Exporting Countries (OPEC) that the output of oil would remain the same, energy producing stocks went down; the S&P 500 index declined 0.25% to 2,067.56 basis points. Similarly, Brent crude oil futures and WTI crude oil futures sunk to the lowest in over 4 years last Friday. Given economic slowdown in Central Europe, surged production of US shale oil and uncut production of OPEC, the supply in the oil market is, still, greater than the demand. Thus, it is estimated that this decline would continue. High-profiled Swiss referendum failed with 77.3% voted against, and the result lead to a drop of gold prices. Data shows that the November CPI’s initial in the Euro zone year-on-yearly increased 0.3%--the lowest in past five years. The upcoming European Central Bank (ECB) Monetary Policy Meeting may discuss about further stimulus. However, ECB’s top managers said “it is hard to take further easing”. Besides, Germany, the major holdout, said that the European Union (EU) had the right to veto the budgets of member countries. This overshadowed the project of increasing public investment in Euro zone. Chinese National Bureau of Statistics is going to announce November manufacturing PMI index. The index, which should be paid attention, was 50.8 last month and is estimated at 50.5.

Stock Index

Stock index surged again last Friday. Though plunged during the sessions, it picked up quickly, indicating a strong market. The People’s Bank of China (PBC) drafted the Proposal of Regulations on Deposit Insurance, polled it might be applied form the Q2 next year. The further advanced market-oriented reforms of interest rates would negatively impact the banks in a short run. Simultaneously, the expectation of interest cut boosted. There is continued inertia of bull market under the downward logic of fund prices. Short-term market strength will remain.


Dragged by the technical selling of soymeal futures, the weakness of spots and the decline of merchandizes, US soybean dropped last Friday. Weekly export data was better than expected, as one-week soybean exported for 1,485 thousand tons. US soybean is waving among $10 to $11; the intense of former spot US new soybean was eased with the increased supply. The market is now more concerned about later export and the trend of Chinese vertex buying price. Currently, soybean sowing in South America accelerated, and the weather improved, even the drought in Brazil has been relieved. Current commodity environment is weak, which may drag down soybeans. Temporarily pay attention to US soybeans in $10 support. Dalian Commodity Exchange (DCE) market was weak shock, and spots kept weak. Prices in the producing regions fell to 4,240-4,380 per ton. Currently both the purchasing and selling are weak, since famers are not active to sell and merchants think the future market will be bearish. DCE soymeal fluctuated; the supply of spot was weak out of stable. Lately once the imported US soybean has arrived, the spot price will continue its downward trend. Moreover, the operation rate of oil factories may increase, which makes the pressure on spots supply become even stronger. In consideration of recent weakness of external environment, we suggest to keep short view of DCE soymeal, and also for far month contracts of DCE No.1 soybeans.


PP fluctuated at the start of last week, and fell below former oscillatory interval associated with the plunge of crude oil prices last Friday. In the upstream, propylene prices declined on Friday, precisely, FOB Korean propylene dipped $35, averaged at $970.5 per ton. In devices, centralized maintenance started at last early month is still on proceeding. Since 300 thousand tons of Shaanxi Yanchang Zhongmei Yulin Energy and Chemical Co., Ltd. will be sended to maintenance this weekend, operation rate would be lower than early this week, but higher than the former period. Shenhua Ningxia Coal Industry Group started a trial run of a new PP line, thus, Shanghai Pucheng Energy Co., Ltd. expected to go into operation of this line. Centralized maintenance, eroded by high social inventory, had inefficient support for the market. In spot market, prices of general materials in domestic polypropylene market slightly reduced, downstream demand supplemented to follow up. Sinopec lowered the price, led to market price slightly decrease. Thus, merchants covered prudently, mostly sell as opened. Take wire drawing as an example, spot price in North China is RMB 9,800-10,250, RMB 10,100-10,400 in East China, and RMB 10,200-10,400 in South China. Judging from the fundamentals it is still weak. 1505 contracts built up a gap. The decline trend of oil slowed down this week, 1505 contracts might slightly rebound and try to cover the gap. However, there is a half-month concussion previously in the sideway, and the moving average system was vibrating among the concussion interval.
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