Daily Report 220115 2015-01-22
Macro Economy
The U.S. stock markets grow for the third day. Predictions about European Central Bank (ECB) putting forward further stimulations warmed up, and simultaneously, oil prices rebound triggered energy shares increase. Thus, S&P 500 index closed up by 0.47% at 2,032.12, among that, energy index rose by 1.83%. On the data hand, U.S. new house start index rose in December on the month, polled yesterday, higher than expected, while construction permission fell month on month, indicating the expansion of such industry is not smooth. Since oil prices drop raised risks of inflation decline and financial instability, Bank of Canada (BOC) surprisingly cut the interest rate, lowered 25 basis points of overnight rate, created certain disturbance for exchange markets. As for the Europe, two officers in the Euro zone disclosed that president Draghi and ECB executive board would advice to purchase 50 billion euros asset monthly until December 2016. Therefore, the quantitative easing (QE) scale would up to 11 trillion euro. The concrete project would finalize tonight, pay intensive attention.
On the domestic hand, president Keqiang Li speaked at the World Economic Forum in Davos, that hard landing would not happen for Chinese economy though facing the pressure of decline; and no regional systematic financial risks would appear; the government would keep fine tuning, further implement directional regulation rather than flooding the economy. The president of People’s Bank of China (PBC) Xiaochuan Zhou said that Chinese economy can sacrifice the growth rate to exchange for sustainability. Overall, regulators would not change their mind of structural adjustment and reformation, though knowing that the economy is facing a greater risk of decline. Can expect later easing policies for stabilize growth.
Domestic AU1506 contracts topped down in the night session, were resisted at RMB 263, short-term indicators partially deviated while appearing as rebounding.
On the operation hand, long positions at RMB 247 can be hold backing against 5-day moving average, moderately stop loss at RMB 258. Gold prices present the accelerated rebound trend this week, beware of short-term rapid correction risks. Global economy recovery is slow, countries take diverse monetary policies against Fed’s interest raise. Bank of Japan (BOJ) denied the possibility to carry on QE on Wednesday, led to appreciation of Japanese yen against U.S. dollar. Accordingly, U.S. dollar index drop promoted gold prices bounced back to a 5-month high. While at the same time, The European Central Bank's Executive Board has proposed a program that would enable the ECB to buy 50 billion euros ($58 billion) in bonds per month starting in March, a eurozone source said on Wednesday; the total purchase is estimated to be 600 billion to 1.1 trillion euros, far more than previous expectation. The specific policy would fix at 8.45 p.m. on Thursday, focus on the details.
On the funds hand, gold ETF cut 1.79 tons overnight after 3 times position rise, indicating funds starting sell on rallies in small amounts.
Synthetically, ECB easing policies prove Euro negative, and US dollar positive, and depressed gold prices denominated in US dollar. However, Greece national election on Sunday is strongly uncertain, plus the border of Russia and Ukrain fought again, these triggered risk-averse purchase need.
Domestic AG1506 contract topped down in the night session, was depressed at RMB 3,985 by the moving average at RMB 250.
On the operation hand, long positions established at RMB 3,600 can still be held back against 5-day moving average, caution risks of short-term correction, pay attention to the effectiveness of supports at RMB 3,800. Overall, silver prices move along with gold prices, has catch-up features compare with gold, but still act as a weak metal. Funds show that positions of silver ETF remain sell-on-the-rally since December 2014, and have not changed for 5 days after two cuts of 92.32 tons last week, indicating the bearish view of funds against silver prices though they rebounded.
Stock Index
Stock index performed retaliatory rebound yesterday. Brokerage shares have been red for two days, indicating that leverage funds got the chance to withdraw, and trading risks have been eased. According to the speech of Xiaochuan Zhou on yesterday, the Chinese government has no interests to allocate too much liquidity into the market, the monetary policy would be stable. This means investors cannot over expect for monetary easing, such policy would come out when necessary. Since the market dramatically surged and plunged, market sentiments are mixed, clear tendency can be found only when the market is stable.
LME copper price waved by up to $200 on Wednesday, but still closed up by $23.5 at $5,736. Domestic 4-month contracts surged 1.55% (RMB 640), closed at RMB 41,820. View from a macro perspective, ECB is going to release QE at the monetary policy conference. A euro zone source said on Wednesday that the ECB's Executive Board, which met on Tuesday, has proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month from March, the duration is one year or longer. This triggered positive expectations of the economy. Our concerns are about the change of US dollar, whether it would be bear after 13% surge. Besides, the crude oil market support copper markets. Recently, BP, Conoco and Total declared to cut crude investments. Furthermore, the minister of Iraq crude oil department believed that oil prices had reached the bottom. LME spot premium edged back by $4 to $30, inventory increased by 3,225 tons to 219,000 tons.
Domestic spot premium remains between RMB 50-130, fine copper source is abundant, while the supply is stressed. Less entries among intermediates and upstream, trading volume is bad. Copper plunged by 13% at the beginning of the year, has less reactions towards those bearish news.
On the technology hand, copper prices showed well supports recently, if can break above $5,800, then the price would keep rebounding towards $6,000. As for domestic 4-month copper contracts, if the price can break above RMB 41,800, the next rebound target is located at RMB 43,000. Remain rebound operations.
                                                                               Dong LV (Investment Certificate NO. TZ008452)