Daily Report 181215 2015-12-18
Macro Economy
US stock market dropped; S&P 500 index stopped three continued raising trend since investors had flung the Fed interest rate hike aside and, started to focus on the outlook of weakened commodity and global economy growth. S&P 500 index dropped 31.18 point or 1.5% to 2041.89 point. Major US data released on Thursday showed, up to 12 December, initial jobless claims decreased 11,000 to 271,000 in the week, was better than expectations from the survey economists which revealed a continued strong US labor market. After Fed increased interest rate for the first time, inflation was still the focus. According to guidance from Fed, if interest rate hikes in March, Fed will give further implication on 26, 27 January meeting. On Europe side, ECB indicated in Economic Bulletin published on Thursday that, analysis had verified the necessity of accelerating monetary stimulus to make sure inflation was approaching 2% level; Management Committee would pay close attention to development on the outlook of price stability and, if with proper reasons, was willing and able to take actions by using all possible tools within it scope of authority, for maintaining monetary policy in a proper easing level. We regarded whether Euro Zone would further expanding QE in later period depend on the rally of inflation level. Caused of current crude oil price slumped and, uncertainty from own economy growth, there would be challenges on Euro Zone inflation rally; possibility on expanding QE was huge. But the economy growth was expected to be limited even expanding QE since lacked of increasing momentum. Weakened Euro under QE would boost US dollar and, added motivation on strong US dollar in a long-term.
Stock Index
The central economic working conference will be held in intraday, seems market already has reactions in yesterday’s session; there are more hopes from supply side reform. On news side: on yesterday national conference, China will accelerate implementing free trade area strategy; ministry of finance noticed a three-year trial PPP project on rewards instead of subsidies. After president Xi attended World Internet Conference, Ministry of Industry and Information Technology was stepping up preparing an internet industry alliance. With the addition of contents in the meeting of the Political Bureau a few days ago, would properly promote enterprises to survival of the fittest, achieved market clearance by merging and reorganization, bankruptcy liquidation; would help enterprises to reduce costs, promoted housing system reform and expanded stabilized effective demand on real estate market. In recent period, market sentiment was shifting between boost from reform and downward economy; so long as economy downward showed slightly stabilizing, motivation of reform would be accepted by market. Current news was bullish and, economy data slightly stabilized, index might continue rising, overall pattern was in fluctuation.

Thursday copper price continued adjusting, but shortens closed positions as low point had limited the copper price retrace scope. On fundamental side, LME spots discount narrowed $2 to discount $2; inventory decreased 300 tons. Shanghai copper spots were discount RMB 70 to discount RMB 10. Recent weakened spots market was the crucial reason on copper price downturn. From analysis, this was related to selling momentum caused from tension cash flow by the end of year, but even that scope on copper price downward was limited, hammer on market would plainly weaken after the end of year. Recent RMB exchange rate as well bolster domestic price. The slumped domestic consumption was an unquestioned fact but, it is worth noting that completed electric power investment sharply increased since October; cable factories started to increase orders and operation rate, along with smelting plants would reduce yields in next year, possibility of copper price upward trend was huge in the future. Anglo American predicted to reduce 80,000 tons copper output to 600,000-630,000 tons in 2016. Technically, copper price is likely to fluctuate at the bottom in short-term, we wait for a sign on copper price ended adjustment.
Soybean No.1 contract rallied from prior low point, showed bolster from prior low was strong. Overall market buying and selling momentum had no plainly improvement current, current surplus grain in Harbin, Suihua, Heilongjiang Province was about 50%-60%, surplus grain in Heilongjiang expended faster at about 50%; Tsitsihar expended was slower than previous years at above 60%; surplus grain expended slowly in east, generally surplus above 70%; surplus grain in partial villages was even above 80%. We considered soybean No.1 contract would fluctuate during RMB 3600-3800/ton in a short-term, recommend longing at high and shorting at low among this interval.
Soybean meal price was weak out of stabilizing, in partial areas and oil plants slightly deceased. Trading volume continued slightly increased, new opened basis and closed basis suspended. Wednesday oil against meal ratio was 2.36:1 in weaken tendency. As for operation, we recommend appropriately arbitraging between long meal and short oil.
                                                                   Dong LV (Investment Certificate NO. TZ008452)