Daily Report 020216 2016-02-02
Macro Economy
US stock market benchmark stock index ended at leveled off, rallied technology sector helped to relieve the concern on Chinese economy slow down might spread. S&P 500 index ended edged down 0.86 point or 0.04% to 1939.38 point. From data side, US January ISM manufacturing industry index was lower than the 50 threshold for the fourth straight month and, was close to the lowest level from June 2009. December PCE leveled off month-on-month and, increased 1.4% year-on-year. December personal income increased 0.3% month-on-month. Overall, the improved employment and the increased salary drove the income continuously increasing and, is conducive to strong the inflation. But since the energy price is in the low level, core inflation will be continue stronger than the overall inflation and, the overall inflation is hard to rise back the 2% Fed target before energy price rallies or the carryover effect eliminates. Fed vice president Fischer indicated it was hard to judge the impact from recent financial market fluctuation and uncertainty from Chinese problem to US economy, the decision makers were still hesitated about what move to make in the next step. Compare to prior consistently hawkish attitude, this speech showed a sign on his stance softening; we still hold the estimate on interest would be hold at most once in the first half year, possibility on US dollar index soared was small and even might dropped back under hammer. In addition, on Europe side, ECB president Draghi indicated that the risks on destroying Euro Zone economy reviving might exist. ECB executive committee member Coeure indicated, ECB might reconsider the policy stance at March meeting; ECB management committee Smets indicated, ECB decision in March would depend on the economy data. ECB is still on track to lead the market expectation on extending stimulation in March.
 
 
Stock Index
Yesterday stock index edged down, steel and coal sector dropped more; among all Shenwan first classes, only leisure service rallied. PMI continued weakening; economy data hold hope to stronger. Though evaluation of CSI 50 was low, facing the factors as banking spread was decreasing; competition was exacerbating and, the potential bad debt was inestimable, it would not rally. In addition, overall trading was still in the low level, upward trend fail to rally over five-day moving average and, late market price dropped back, continuously momentum in the future was weak. From macro side, neither reform nor nation bailout, supply side reform forms the condition to reverse; the economy is in the plainly downward trend. Practitioner’s confidence is shattered, retail investor thoroughly lost confidence after three stock market crash. Overall, there may be fluctuation at this point but, index will continue weakening in the future after rallies.
 
 
Copper
Monday copper price rallied after dropped. Since gulf countries expected to observe the impact of Iranian crude oil back to market and, did not support holding OPEC emergency meeting currently; the international oil price slumped 7.17% again yesterday; the weakened crude oil market performance was still affecting the whole financial market. Yesterday released official manufacturing industry PMI still in bad performance as well drove the domestic stock market back to downward trend; copper price still under hammer. From yesterday copper side, LME spots premium increased $2 to $11; inventory turned to decrease 2975 tons. Shanghai spots discount extended RMB 10 to discount RMB 230-150; market supply was sufficient, market entering volume from downstream gradually decreased. The Spring Festival holiday is coming in the next week, current consumption enterprise has already into the holiday stage. On supply side, First Quantum total copper output at the fourth quarter of 2015 was 120,000 tons, increased 14.3% year-on-year; copper annual output in 2015 increased 0.1% to 428,000 tons year-on-year, exceeded prior expectation. Technically, copper price was in adjustment, we recommend waiting for buying opportunity after adjustment.
 
 
Soybean
DCE soybean was in weak tendency, trading pace started to slow down before the Spring Festival; oil against meal ratio was 2.29:1, started to retrace after a series rally trend. On spots side, stabilizing was still the mainstream keynote, Inner Mongolia and most Heilongjiang grain area stopped buying and selling, trading in each area was thin; grain merchant hold bearish expectation on future market; recent attitude on market entering was in cautious, market stock up volume was small before holidays. We regard soybean No.1605 contract will mainly in weakly volatile before and after the Spring Festival.
Soybean meal market terminal stock up ended, spots price were stabilizing; market started into holiday pattern; oil plant would back to operate at the seventh and eighth day of the of the first lunar month. Quotation of oil plant at port was mostly at RMB 2600-2650/ton. Oil against meal ratio was weakening out of fluctuation. As for operation, we recommend holding soybean in bear or holding arbitrage between long oil and short meal at the last week before holidays.
 

PP
Yesterday PP futures fluctuated in low level; opened at 6125 and ended at 6111; trading volume decreased 357,000 lots to 1.096 million lots; holding decreased 7244 lots to 653,000 lots. On spots side, yesterday domestic PP market price edged up out of stabilizing. Though petrifaction increased producer price, plants in downstream gradually left the market, trading and investing was thin; quotation limited to rally.
Current main quoted prices for wires of north, east and south markets are RMB 6250-6350/ton, RMB 6350-6550/ton and RMB 6550-6750/ton, respectively.
As for operation, current moving average system formed in bull but, MACD red column shortened; Spring Festival was approaching recently, demand in downstream was small, predicted would continue fluctuate in the holidays.
 
 
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