Daily Report 070715 2015-07-07
Macro Economy
Yesterday U.S. stock market ended up low, S&P 500 index rallied after the largest weekly deceased range from 3months and then fell again; S&P index ended decreasing 8.02 point or 0.39% to 2068.76 point; Greek referendum vetoed Euro group bailout scheme made market in caution and, oil price slumped dragged the energy shares. In data side, U.S. June ISM non-manufacturing index revolved to 56 from a year low in May; lower than predicted 56.4; Markit issued U.S. June Service Business Activities Index was 54.8 as same as initial value.
As for Euro side, leaders in Euro zone will hold Greece issue summit, German Chancellor Merkel indicated it will be very important that Greece offer a project for advancing. According to an informed source, Euro central bank declined request of Greek raising €3billion limitation for ELA; raised discount ratio of ELA collateral; ELA ceiling maintained at €88.6billion level. Euro central bank predicted Greek bank may get to Wednesday without into extra liquidity, IMF president Lagarde informed Tsipras there was only technically bailout IMF may offer. In addition, Greek Finance Minister Yanis Varoufakis quitted, new elected Finance Minister Euclid Tsakalotos stated would like to continue negotiating with creditors, lengthening bank holiday and capitol control to Wednesday.
Overall, Greek referendum vetoed Euro group bailout scheme increased risk to market, there is small possibility the creditors will compromise; Greece need to repay IMF €450 million fund in 13 July and default may continue; probability of Grexit raised, EUR and peripheral European debt still faced a huge pressure.
 
 
Copper
Copper price slumped then volatile in low points on Monday. On macro, Greece side is still in tense, after Greek citizens’ referendum vetoed austerity requirement, German stand firmly on objecting to Greece debt write-down. Euro central bank maintains the Greek ELA limitation as the same but will adjust the ELA collateral discount ratio; which means Euro central bank will no longer give more bailout to Greece. There stood one last chance for Greece, handing over new reform measure to Euro zone leaders in Tuesday night. Greek Finance minister resigned on Monday, new finance minister on board which make possibility for situation transformed. Pay attention on Tuesday. Besides, Chinese stock market is also a focus.
As for spot side, LME yesterday discount decreased to $15.03, inventory decreased 475tons, domestic copper spot premium 180-230, and domestic supply pressure raised; import window still opened, profit soared to RMB400; in addition, news as domestic smelting plant agreed to decrease $10 processing charges since lacking of clean mine. Peru copper yield in May increased 16% on year to year base, total 132,000tons. Overall, current market focus on macro side, whether economy will come into another recession will determine copper price low point be $5300 or decreased to $4500. Corresponding domestic price was RMB 39,000 and RMB 32,000. We recommend avoid macro risk in a short period and operate in short positions.


Soybean
Soybean No.1 contract continue felling with adjustment trend, spots price of most areas in northeast drop further; recent period domestic soybean lacks of demand, peasant households anxious to clear grain surplus extends the weaken trend; it is predicted soybean No.1 contract will continue weaken with volatile in a short period, but since operation price is plainly lower than warehouse receipt, it is not recommend to over shorten.
Soybean meal spots price mixed, since last week spots increasing range most were near RMB 150/ton, reduced the operation crush margins loss; but the port arrival amount in June and July would be large, the future market still face the pressure from supply side; this is to say, continue rebounding trend of DCE meal need coordinated further rally from U.S. market; U.S. market will rest in recent days hence we do not recommend chasing bullish in DCE meal. As for operation, pay attention to soybean meal stop-profit on unilateral long positions.
 
 
PP
Yesterday PP futures opened up low and went lower, opened at 8569 and ended at 8362, trading volume increased 215,000 lots to 579,000 lots, and holdings decreased 29,276 lots to 352,000 lots. As upstream side, FOB Korea propylene decreased $11, average price was $905.5/ton. In spots side, yesterday domestic PP market decreased weakly, price in most areas decreased about RMB 100/ton. Futures opened low and went lower, most petrifaction price reduced under hammer, weakened bolster from supply costs; merchant follow the bearish trend and shipped to clear up warehouse, mindset to future market tended to be shorten. Demand of receiving from downstream plant still does not raise, real market still purchase as demanded; poor trading enhanced market declining tendency, investing and trading was thin.
Yesterday main quotation of wires, north market was RMB 8400-8550/ton, east market was RMB 8600-8800/ton and south market was RMB 8550-8800/ton.
As for operation, current price fell through moving average system and upward trend line, the downward trend showed preliminary. Meanwhile, crude oil price will continue dropping and we recommend shorten positions when hit high points as for operation.

 
                                                                            Dong LV (Investment Certificate NO. TZ008452)