Daily Report 270215 2015-02-27
Macro Economy
The U.S. stock market was mixed yesterday, technology stocks drove Nasdaq Composite climbed near to the record high, while energy shares dragged S&P 500 went low. Plenty of economic data released yesterday: U.S. Jan. CPI declined 0.7 percent month-on-month, loss 0.1 percent year-on-year; U.S. Jan. core CPI (exclude energy and food price) rose 0.2 percent month-on-month, gained 1.6 percent year-on-year; Jan. durable goods orders surged 2.8 percent—the first increase in three months, indicating the stability-oriented manufacturing industry; weekly initial jobless claims gained 31,000, to 313,000, forming the biggest increase since December 2013, indicating the instability of labor market.
On the other hand, although inflation and other data are declining under pressure, their performances exceeded the expectations. Then a part of Fed officials in St. Louis, San Francisco, Cleveland and Dallas pointed out that it was better off to raise interest early then late.
Nevertheless, impacts triggered by oil prices drop since the middle of last year would ease in the middle of this year, the CPI then might return to the Fed’s target of 2 percent, the core CPI even might reach to 2 percent earlier. Both U.S. dollar and U.S. debt surged, showing that the market was worrying about the Fed raise interest rate in advance. But, in our perspective, interest raise is more likely to happen after the inflation recover, that is, in the middle of the year or the latter half of the year.
As for domestic market, People’s Bank of China (PBC) conducted a 14-day, 38-billion-yuan reverse repo yesterday, as the fist liquidity easing after the vacation. And 125 billion yuan reverse repo expired at the same day, the net proceeds is 87 billion yuan. The uptrend of money market interest slowed down during the vacation, while Shibor did not fell, indicating the continued funds pressure near the month end. Beware of short-term liquidity risk.
Domestic AU1506 opened high and then went low during the nights session, 5-day and 60-day moving averages bonded at 247.5 yuan in the short term. The trend was still bear. But beware of rebound recovery posture in the short term.
Operation strategy: for short positions established earlier at 254.5 yuan high, prepare defense at 249 yuan, the correction is projected to continue intraday, risk averse investors pay attention to operation opportunities breaking through 249-244 yuan.
Euro zone approved a four-month extension of Greece’s bailout, the risk of Greece exit the E.U. decreased, then market attention turned to the U.S.—Jan. durable goods orders and CPI were strong, triggered worries about the Fed raising interest in advance; U.S. dollar index went back to 95 basis points. Accordingly, gold’s rebound encountered barriers. On the other hand, profit-taken of short positions in gold markets was obvious this week, thus, technique rebound might happen in the short term.
Domestic AG1506 opened high and went low during the night session, got strong support at 60-day moving average around 3,585 yuan, while rebound resistance at upward side was heavy.
Operation strategy: hold short positions took previously at 3,800, and prepare defense at 3,700 yuan, fell into the intensive transaction interval at 3,700-3,550 yuan again in the short term. Risk averse investors pay attention to operation opportunities breaking through this interval.
Overall, silver prices move along with gold prices. Oeverseas silver prices reversed to $18.5 and then declined under pressure, and recent rebound seems to end up. Yet, there are no significant bearish signs, and rebound correction might happen after significant plunge, the overall trend is projected to drop associated with fluctuations.
Stock Index
The stock index dramatically rebounded yesterday, affected by the expectation according to the State Council’s fiscal stimulus. Building materials (relating to water conservancy and infrastructure), brokerages, color metals and banks heavyweights pulled up the index. The stock index would keep rising provided that a series of stimulus ahead of expectation. If it does happen, restructure would become the second. The market knows a certain extent of fiscal stimulus and oriented infrastructure should be taken to pull the economy, and they can only expect moderate incentives while the country does not declare. Since PMI employee index continued moving at lows, reserve cut earlier, CPI run at lows, RMB depreciated, capital outflow and weak macro data, stimulations might increasingly become stronger. Therefore, the stock index still got energy to rebound, and overbought just happened yesterday, we suggest investors to long at lows.
Domestic and overseas copper markets significantly reversed yesterday, LME copper price surged $101, or 1.74 percent, domestic 5-month contracts rose by 0.56 percent, closed at 42,750 yuan. The overnight copper price surged was partially driven by Chinese stock markets, and the expectation of stabilization policies coming on next Tuesday. During the overseas trading time, euro zone consumer confidence index stronger than expected, plus euro zone is going to implement QE from next month, those enlarged copper price increase. The bullish impact is that the Fed chairman mentioned to raise interest in advance again, triggered U.S. dollar index surged 1.106 basis points, pressured commodity markets in certain extent. We consider that U.S. dollar is unlikely to raise interest rate in the first half of this year. The U.S. employment data would announce today, which is critical in deciding the future trend of copper markets.
LME spot premium rose $10 to $34, inventory leveled off at 295,000 tons. Current market attention is focusing on the actual consumption in China. We still believe that drops of consuming industries’ orders and output are exaggerated. Whereas, overall, China’s economic slowdown and manufacturing surplus have not changed. Thus, we believe that copper prices are just rebounding rather than turning the trend.
Operation strategy: copper prices are reversing, LMW support line is at 10-week moving average of $5,845; domestic 5-month copper support line is at 52,200 yuan. Hold long positions, but prepare to take profit.
Overnight U.S. soybeans closed up, triggered by Brazil truck workers strike. The strike has last for 9 days, and 91 public roads have been blocked. This would influence the shipment process at ports. Weekly export data matched the expectation, the weekly U.S. soybean export was 459,000 tons. Institutions insisted the prediction of Brazil and Argentinean harvests. The estimated Brazilian and Argentinean soybean outputs were 94,700,000 tons and 58,000,000 tons, respectively. U.S. soybean is waving above $10, and strike-triggered shipment problem would bring bullish effects in the short term. The U.S. soybean rebound is indicated as periodical pattern. Since the supply and demand structure has not changed essentially, and soybean waving interval moved upwards, the afternoon session is considered to be the outcome of recent bullish news.
Domestic soymeal continued the strong trend, Soybean No.1 waved below 4,300 yuan/ton, short-term weakness was obvious. Domestic-made soybean spot remained the pattern before the vacation, and the trading would resume after 15th lunar January. Current Soybean No.1 trading volume is small, and its current status has less attraction to merchants. Soymeal spot quoted prices have risen, and since the operation rate of oil factories is low after the vacation, and inventory levels are divergent in different places, most spot prices rose above 3,000 yuan/ton. As for the futures, have locked at 2,800 yuan, and have strong trends.
Operation strategy: take long positions for soymeal back to 2,800 yuan. Take wait-and-see attitude for Soybean No.1.
PP futures opened high and went higher yesterday, opened at 8,390 yuan and closed at 8,396 yuan. The trading volume rose 123,000 lots to 482,000 lots, and positions gained 3,412 lots to 223,000 lots. On the upstream hand, FOB Korea propylene ascended $50, and averaged at $915.5/ton. On the spot hand, domestic PP market prices narrowly corrected yesterday, a part of petrochemical enterprises raised ex-factory prices, enhanced the support towards market cost. PP futures moved at highs, continued to inspire market sentiments. Most merchants lacked sources, and had less willingness to sell, were mainly hold wait-and-see attitude. Minority of running downstream enterprises was mainly consuming stocks before the vacation, and had less willingness to buy, transactions were dominated by the replenishment of merchants.
Main quoted prices in north, east and south markets were 8,200-8,400 yuan/ton, 8,350-8,500 yuan/ton and 8,500-8,700 yuan/ton, respectively.
View the market as a whole, the bullish pattern of moving average system is forming, MACD exposure diverges upward, as an uptrend.
Operation strategy: hold long positions, however, risks have risen due to previous overbought and crude oil posture ambiguity, we suggest investors to operate prudently.
                                                                         Dong LV (Investment Certificate NO. TZ008452)