Daily Report 170316 2016-03-17
Macro Economy
US stock market rallied yesterday, since Fed implied might slow rate hike under the slowed down global economy and volatile financial market. S&P 500 index raised 11.29 point or 0.56% to 2027.22 point. From news side, yesterday released data showed US February core CPI excluding food and energy increased 0.3% month-on-month, headline CPI dropped 0.2%; manufacturing industry output value increased 0.2% for the second straight month rise, implied the manufacturing industry might start stabilizing; industrial output value decreased 0.5% under the influence of public utility output value and, set the largest downturn since March 2007; new housing starts increased 5.2% but, building permit decreased 3.1%, showed further increment in the future was limited. Data is mixed with bull and bear but, the more important inflation data is still rallying. In addition, on the Fed interest rate meeting and press conference, Fed keeps the interest rate target at 0.25%-0.5% and, indicates the global weakly economy and volatile financial market will form potential impact on US economy. To put this in perspective, this statement mentioned “development on global economy and financial condition still bring the risks”. In addition, Kansas City Fed president George blackballed and, proposed to hike interest rate 25 BP. According to latest lattice diagram, this year expectation on interest rate hike has decreased from four times in December to twice, is less than expected three times. Policy statement rarely indicates has noticed bout recent rallied inflation. Yellen indicated at press conference, possibility on interest rate hike still existed at April meeting, lattice diagram should not be regarded as expectation which “endorsed by the committee”. Meanwhile she emphasized, the facing risks had decreased recently and, didn’t consider about negative interest rate and more stimulate measures. Overall, this meeting statement is neutral but, lattice diagram from US Fed officers’ expectation on the future interest rate decreases twice which is over expectation and, market expectation on mid-term inflation still hasn’t rallied which causes market shows dovish understanding on this meeting conclusion.US dollar dropped after news released, gold and US debt swiftly increased; on short term market still need time to gradually digest this information.
Wednesday copper price get rid of weakness and showed strong revive trend. On copper market, LME inventory continued decreased 3050 tons, spots premium decreased $1.5 to premium $15. Domestic discount RMB 210-140, market was still under oversupply. LME inventory in the low point was still the bolster factor to market. From history side, domestic and overseas inventory has showed divergence several times and, eventually price will go low. We wait for domestic and overseas momentum gradually switch.
Technically, copper price formed continuously small triangle, if price rose above $5000 in the future market; copper price will rise to $5200. We recommend operating in long in a short term.  
DCE soybean performed volatile, strong oil and weak meal pattern continued; oil against meal ratio still hovering at recent high. Recent soybean market overall keep weakening out of stabilization; cleaned grain purchase price further dropping after broke though 3700 mark, this week downward rage extended. Grain spot in partial areas of Heilongjiang stopped receiving, since protein soybean and tower soybean both showed unsalable pattern, grain merchant lacked of confidence to enter market and, were mostly in observation. From soybean meal side, intraday spots quotation slightly dropped at RMB 20/ton; spots and basis trading was flat. Oil plants at coastal quotation at RMB 2420-2480/ton, demand from downstream was insufficient; market observe momentum was thick, short term tendency was weak. As for operation: we recommend cautiously entering soybean sector and, arbitrage between oil and meal staying in observation temporally.
Yesterday PP futures opened high and went high; opened at 6901 and ended at 7073; trading volume increased 145,000 lots to 2.001 million lots; holding increased 18970 lots to 427,000 lots. From spots side, yesterday domestic PP market tendency was stabilizing, partial price slightly loose RMB 50/ton. Though Petro China east china, south china; Sinopec south china and other petrochemical plants reduced producer price which weaken the bolster to supply cost; but since futures opened high had boosted practitioners’ confidence, merchants profit surrender scope was limited, few merchants were reluctant to sell out. Plants in downstream continued purchase in rigid demand, real market trading was mainly on satisfying production; digest progress on supply was not plainly.
Intraday main quoted prices for wires of north, east and south markets are RMB 6850-6900/ton, RMB 6850-6950/ton and RMB 7100-7200/ton, respectively.  
As for operation, current moving average system still arranges in long; MACD green column shortens, recent price is expected to continue strong volatile.
                                   Dong LV (Investment Certificate NO. TZ008452)