Daily Report 180316 2016-03-18
Macro Economy
US stock market rallied yesterday, Dow Johns index rose back the downward scope since 2016; weakened US dollar stimulated commodity producer and industrial sector to rally. S&P 500 index raised $13.37 or 0.66% to 2040.59 point, US dollar index continued dropping. From news side, US last week initial jobless claim increased 7000 to 265,000, was lower than expected, showed employment market continued stronger; the fourth quarter current account deficit narrowed to $125.3 billion, expectation was $118 billion. Fed former chairman Greenspan estimated inflation return might became the crucial worry on US economy. But from prior data side, current market inflation expectation was still at low point. From Europe side, ECB president Draghi expected interest rate would keep present level or lower level for a long term; and there was news on Draghi had told EU leaders, there was no choice but to decrease interest rate. But this was contrary to prior attitude from Draghi, we regarded there was high uncertainty on whether would be another rate decrease from ECB; if data continue weakening, possibility on extending QE existed. In addition, yesterday Bank of England continued the 0.5% benchmark interest rate and, indicated referendum on England “Brexit” brought uncertainty and, might delay the investment decision, restrict the economy growth.
From domestic side, Fed over expected “dovish” statement dragged back the level of US dollar to eight month ago; RMB took advantage to rise to year high; forward market bearish RMB index as well dropped to the lowest level since last June; offshore US dollar/ RMB exchange rate soared to 6.4496 yesterday. But according to Bloomberg survey, economist were more pessimistic on the RMB target by the end of the year, expected mid-value showed bearish to $6.78. Overall, recent China domestic economy data has improved and, shows phased stabilizing signal; Fed released statement which is read as dovish, recent RMB devaluation hammer decreases. From mid-term side, economy growth slowdown still hammers the exchange rate by capital accounts. In addition, State Statistics Bureau will release 70 large and medium-sized cities housing properties price at intraday morning 9:30, prior January data shows 38 cities new housing price increased month-on-month, pay attention on this data.
Thursday copper price continued rallying, copper price still in strong revive trend. From leading factors, Fed reduced rate hike times in this year which dragged the US dollar and, brought revive momentum to copper price. On copper market side, LME inventory continued decreased 6100 tons, spots premium sharply increased $11.5 to $26.5. Domestic discount RMB 220-160, overall market was still in hard to digest pattern. From supply side, Turquoise Hill Resources annual output was 68,000 tons in 2015; company estimated would increase this mine output to 175,000-195,000 tons in 2016. Technically, copper price revive momentum is strong and, might rise to $5200 in the future. We recommend still operating in long in as short term.

DCE soybean was strong, strong oil and weak meal pattern continued; oil against meal ratio set phased high point. Heilongjiang area soybean price was mostly stabilized, price of partial areas of Inner Mongolia dropped. Current processing factory still prefers to choose high quality soybean along Huaihe River which, exacerbates sluggish northeast export soybean and, expected this strong in south and weak in north pattern will continue in a short term; soybean price in northeast still might drop.
From soybean meal side, spots quotation still mainly in stabilizing, oil plants at coastal quotation was RMB 2420-2480/ton, market still in oversupply; shipping at terminal market was slow; sluggish demand failed to boost market in short term, oil plants price was easy to drop and hard to rally; under the stronger grease, meal price would still in weak in short term. As for operation: soybean meal entered in light position and operating in short; arbitrage between oil and meal staying in observation.
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