Daily Report 180116 2016-01-18
Macro Economy
US stock market slumped on Friday, S&P 500 index dropped to the lowest point from last 25 August. Since the continued storm on crude oil market and the poor US retail sales data, caused concern on US economy. S&P500 index dropped 41.55 point or 2.16% to 1880.29 point, fell below the key bolster again after a brief rally; technically it was still plainly under hammer, new direction might still in downward. On data side, US December retail sales decreased 0.1%, the whole year performance was the worst since 2009 and, worried the market on US consumption expenditure tendency in 2016. January University of Michigan confidence data rallied from 92.6 in December to 93.3 as the highest point from seven months. San Francisco Fed president John Williams indicated, it might taken three years for interest rate back to normal, the easing monetary policy need to gradually exit since the economy still need bolster from this kind of policy. New York Fed president William C. Dudley indicated the US economy outlook had no big variation since the Fed meeting in December, though the largest concern was on inflation expectation dropped out of control on price outlook perspective, the continuously faster than expected economy growth would push up prices. In addition, JPMorgan Chase postponed the Fed interest rate hike timing from March to June. Overall, we regarded along with the improved economy especially the stronger inflation and, slowly interest hike would be the best path for Fed interest hike, current possibility on Fed hike interest in June was larger than in March.
On domestic side, Friday data showed December social financing scale was RMB 1.8151 trillion, including new yuan loans at RMB 832.3 billion and, financial institution new yuan loans at RMB 597.8 billion. In the financial institution new loans, medium and long term loan made a larger contribution but, non-financial corporations as business enterprise sector medium and long term loan was lower than the same period in last year; improvement on credit demand in the real economy was limited. Meanwhile M2 growth dropped to 13.3%, central bank has launched a RMB 100 billion MLF. But the foreign reserve or the funds outstanding for foreign exchange sharply decreased, the base money gap continued appeared, possibility on reduce reserve was rather high in the future.
Last Friday copper price was under hammer again, LME closed at $4325 under the hammer from new bearish, dropped $79. Domestic copper price dropped under resistance, closed at decreased RMB 170. From leading factors, crude oil market price slumped 4.8% again and closed under $30 which hammered the financial and commodity market, the main reason was Iran would increase 500,000 barrels export volume per day after the international sanction was cancelled. Battle of crude oil market share was continuing, under the condition of most crude oil producing countries were in heavy losses, possibility on output reduction was increasing. Back to copper market, on the spots market, LME premium decreased $7.5 to discount $3.5 on last Friday; domestic was discount RMB 50 to premium RMB 110. Last week three major exchanges copper inventory decreased 7539 tons, including LME decreased 4600 tons; SHFE inventory decreased 2340 tons. On futures market perspective, LME attracted new bearish into the market near $4400, COMEX holding set a record high to 200,000 lots which showed the market divergence was getting larger. In consideration of copper price at the bottom had triggered the high cost producer quitted the market and, there was news on purchasing reverse and output reduction in domestic, options short positions concentrated at $4300, we tended to copper price downward trend was limited, possibility on fluctuation recently was huge. We wait for the long opportunity after copper price stabilizes.
Last week PP futures continued volatile. On upstream side, up to Friday night, FOB Korea propylene average price was $546.5/ton. On device side, current operation ratio was about 90%, slightly higher than prior week. On spots side, last week domestic spots market price fluctuated dropped and, was converged with bearish news; market took the lead in reducing quotation; petrifaction passively reduced producer price; merchants shipped followed the trend.
Current main quoted prices for wires of north, east and south markets are RMB 6050-6100/ton, RMB 6150-6250/ton and RMB 6350-6500/ton, respectively.
As for operation, current moving average system twisted, MACD direction was uncertain as volatile pattern. Recent trend was predicted to continue weakly fluctuation.
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