Daily Report 040316 2016-03-04
Macro Economy
US stock market benchmark stock index ended high, energy sector rose in a leadership. Investors were waiting for the non-agriculture employment report released on Friday. S&P 500 index was edged up 6.95 point or 0.35% to 1993.4 point which close to the 2000 point market again. From data side, US February ISM non manufacturing index down to 53.4, growth slow down for the fourth straight month which set the two years low point; including the employment sub index for the first time drop through 50 threshold over two years. January plants order increased 1.6% month-on-month, set the largest increased since last June. US last week initial jobless claim rose from 272,000 in last week to 278,000, was slightly higher than expected 270,000 but, hadn’t broke through the downward trend on recent weeks data average value. And prior ADP released US enterprises February employment increased 214,000 which exceeded market expectation. Usually February would show strong seasonal employment tendency. Overall, the Friday official non-agriculture employment data had huge probability to bullish, we expected it would slightly over 200,000. Dallas Fed president Kaplan indicated the interest rate policy need to be cautious when in the uncertain outlook and, should keep patience before the Fed March meeting. Fed interest rate funds futures showed probability on interest rate hike in March was only 1.9%. Overall, we predict Fed will not hike interest in March and, market has fully awareness on it.
From domestic side, the fourth meeting of the 12th National People's Congress and members will hold preliminary conference at intraday morning, press conference at eleven o’clock and, will open on Saturday; Premier Li Keqiang will make government work report and release the economic growth target. According to forecast from Bloomberg collected, this year GDP growth target is expected to reduce from 7% in 2015 to 6.5% - 7%; CPI growth target maintain at 3%; M2 growth target expects to increased from 12% to 13%; deficit ratio expected to increase from 2.3% to 3.2%. The relative news need to be focused.

Thursday domestic and overseas copper price continued rallying, LME holdings plainly increased. Thursday US sub index, employment data from the non-manufacturing industry index dropped through 50 which dragged the concern over US employment; US dollar dropped and market focused on the employment data released by US Department of Labor on Friday. From copper market, LME spots premium is $90.5, increases $2. Inventory decreases 3025 tons; LME inventory continues the ten-day-downward trend which causes market’s attention, especially considering the Chinese import window will be closed, the continue dropping LME inventory undoubtedly provides huge bolster to the market.
Back to domestic side, Thursday domestic copper price rallied, spots discount didn’t further extended but, narrowed 25 at discount RMB 160-90, which showed the strong bolster on domestic copper price. Though domestic consumptions were little panic on the high point, the upward trend caused by supply side was still the mainstream. We still focus on the domestic spots premium and the variation on inventories. Technically, copper price is still in the reviving trend, LME is likely to rise to $5000; domestic copper price will as well rise to 39000.

Soybean No.1 contract ended rally at the night session, oil against meal ratio was 2.426:1 at downward trend. Northeast area soybean continued downward trend and, wet rations took a greater proportion, lead to soybean export in a tough situation. South soybean price stayed in stabilization and, was bolster from the gradually decreasing, grain dealers at producing area was hard to take delivery of goods. Recent soybean No.1 contract continued rallying but, there was no difference at supply and demand side. From fundamental side, the rally trend will not last long.
On soybean meal side, domestic soybean meal spots price was mostly in stabilization, partial area and oil plant was mixed with up and down around RMB 10-20/ton; quotation mainly at RMB 2460-2500/ton. Font-month basis showed upward tendency, do not over optimistic on short term soybean market outlook. As for operation: we recommend soybean No.1 take reference at 3400-3600; oil and meal arbitrage can short the oil against meal ratio at 2.45:1, which is long oil and short meal, position ratio is five lots meal to two lots meal.

Natural Rubber
Yesterday Shanghai rubber opened high and went high, US dollar spots market continued strong tendency: domestic spots price 1170-1180 (+40); domestic cargo price 1190-1200 (+40); US dollar RSS spots price 1340-1360 (+40); US dollar RSS cargo price 1360-1370 (+40); RMB mixed glue price 9400-9500 (+300). From news side: up to the end of February, Qingdao Bonded Zone inventory ended the growth trend and showed downturn. Total inventory is 271,400 tons, decreases 6,700 tons compare to mid of February. Including natural rubber 229,700 tons, decreases 4,500 tons; rubber polymer 33,700 tons, decreased 2,500 tons; compounded rubber 8000 tons, increases 300 tons. On macro factor, we recommend paying attention on Friday US economy data. Overall, macro factor will drive the industry to boom, under the circumstance of overseas output decreasing and, domestic stopped delivery, quotation from US dollar spots merchants follow to rally instead of dropping, price expects to continue strong in a short term.

Yesterday PP futures opened high and went high, opened at 6754 and ended at 6820; trading volume decreased 68092 lots to 1.653 million lots; holding decreased 26584 lots to 630,000 lots. On spots side, yesterday domestic PP market continued rallying, price mostly increased RMB 100/ton. Petro China east china, south china, Sinopec central china and other petrochemical continued increasing producer price which extended bolster to supply cost, in addition with futures continued open high and went high earlier, it effectively boosting practitioners’ confidence, merchants actively shipped followed the rally trend; there is no lack of partial merchants with less goods were reluctant to sell out. Plants in downstream excluded price rally, real market receiving was more cautious, difficulty on trading in high price increased.
Intraday main quoted prices for wires of north, east and south markets are RMB 6450-6550/ton, RMB 6650-6750/ton and RMB 6700-6850/ton, respectively.
As for operation, current moving average system arranges in long; MACD red column extends as upward trend, recent price is expected to continue strong.

                                                            Dong LV (Investment Certificate NO. TZ008452)