Daily Report 071215 2015-12-07
Macro Economy
Last Friday US stock market raised; S&P 500 index set the three month largest increase range; employment data boosted the investors’ confidence on the strong US economy and was capable to bear the high interest rate. S&P 500 index soared 42.07 point or 2.05% to 2091.69 point, approaching the prior high point again. On US side, non-agriculture data pave the way to December interest rate hike, November non-agriculture employment increased 211,000 pieces, was higher than the expectation; October data was increased 298,000 pieces after up revised. Meanwhile, unemployment rate was 5%, stayed in the years’ low point. Several Fed 2017 voting member made speeches to support the tighten policy; Philadelphia Fed president Harker indicated the US interest rate hike was sooner rather than later, for creating conditions on gradually interest rate hiking in the future; St. Louis Fed president Bullard reiterated called for rate rise and, mentioned the possibility on US and G7 maintained nearly zero interest rate in the mid-term; Minneapolis Fed president Kocherlakota called for a target-oriented policy to highly reflect the FOMC mid-term inflation and output gap prediction. Overall, each economy indicator was revealing that US was undergoing a continuously reviving and, the economy confidence from Fed was recovering, speeches on tighten policy as well continuously guiding the prediction; current December Fed interest rate hike probability was 79%. On Europe side, ECB president Draghi indicated there was no limitation on the policy action within the authorized scope; capable and willing to take necessary measures to defend the central bank inflation duty. The new stimulate measures would increase about €680 billion liquidity. The Vice president Constancio indicated, the market had wrong expectation on ECB action, its intension was readjusting the stimulate measures instead of launching a new QE. In addition, OPEC has decided to increase 1.5 million barrel daily output to 31.5 million barrel. Analysts regarded this revealed an extension on actual output and, provided a scope to the expected Iranian output increase. Crude oil price would continue under hammer in mid-and-long term.
Last week copper price fluctuated within the interval, performance was stronger on Friday. From macro side, US November non-agriculture employment increased 211,000 pieces, better than the expected 200,000 pieces, which released the concern on US economy slowed down. The data increased the possibility on Fed interest rate hike within this month, but since the US interest rate hike would be gradually afterwards, market reaction was bullish, the US stock market soared and, copper price had no large influence. Friday crude oil price slumped, other commodities all in good performance which revealed the market tolerance increased. On copper market side, LME spots decreased $6 to discount $1; last week LME inventory decreased 5550 tons. Domestic spots premium RMB 10 to RMB 70; inventory decreased 14600 tons. Last Tuesday the written proposal from Chinese smelters indicated would decrease output 350,000 tons bolstered the market. On supply side, Glencore planned to reduce debt before the end of 2016, including accomplish 30% sales work of agricultural sector before the end of June; in addition, it already put two copper mine shares up for sale, valuation estimated over RMB 1 billion.
Technically, copper price was still fluctuated in low point; if LME rose above 4670, next target point would be $5000. If domestic copper price rose above 35000, next target would be RMB 38000. We recommend still buying in low point as for operation.
DCE soybean rallied following the overseas market; oil against meal ratio further stronger. Domestic soybean spots were decreased in south and increased in north. Since heavy snow began to fall in the northeast recently, purchase became difficult and drove the price slightly increased. In addition, north china revived too hard previously, high quotation and low trading made price retraced. Northeast region soybean purchase price still among RMB 3700-3800/ton; north china price RMB 4280-4400/ton; if soybean No.1605 contract back to RMB 3800/ton, the strong trend would remain in short term.
Soybean meal spots were mostly in stabilizing, spots trading volume increased, basis pricing was flat. Current nationwide oil plant operating ratio was high, December port arrival amount was huge, and the hammer from supply side had no decreasing. Oil against meal ratio was 2.42 to 1; tendency was upward in a short-term. As for operation, arbitrage between oil and meal still focus on bid oil and ask meal.
Last week PP futures slightly fluctuated. On device side, current operation ratio was about 89.4%, slightly higher than the week before last week. On upstream side, FOB Korea propylene average price was $571.5/ton. On spots side, petrifaction was inclined to support the price in the beginning of the month, producer price increased, mindset from practitioners was boosted and bid following the upward trend for shipping but, the actual demand from downstream had no fluctuation, receiving was weak. Imbalance between supply and demand was prominent.
Current main quoted prices for wires of north, east and south markets are RMB 6300-6550/ton, RMB 6550-6750/ton and RMB 6600-6850/ton, respectively.
As for operation, current moving average system was still arranged in shorts. Though MACD exposure extended upward, it was still below 0, as the reviving trend in the downward trend. Recent price continuously fluctuated below 6000 point was slightly weaken; the upward momentum was insufficient in the market. And recent crude oil price was weak in the upstream; macro economy slowed; expectation on US interest rate hike was more and more plainly, hammer on Petrochemical supply chain was strong; recent trend was estimated to continue weak. We recommend focusing on the performance at 6000, keeping the prior Contango arbitrage holdings.
                                                                            Dong LV (Investment Certificate NO. TZ008452)