Daily Report 010416 2016-04-01
Macro Economy
US stock market leveled off in the first quarter after getting through the toughest beginning of this year. S&P 500 index dropped 4.21 point or 0.2% to 2059.74 point. From news side, US last week initial jobless claim increased 11000 to 276,000, which set the highest level since the end of January. Initial jobless claim four weeks moving average continued to decline, in addition, prior data indicated ADP employment was slightly better than expected. As for non-agriculture payrolls releases at intraday night, from the foregoing perspective, combined with a seasonal point of view of recent years in March which is mixed with up and down, it is expected to continue at the 205,000 expectation, or slightly stronger. The unemployment rate will remain low at 4.9%, Yellen had indicated 4.8% was a natural rate of unemployment, and if the unemployment rate showed downward trend, the US dollar would got boosted. From Fed officers, Chicago Fed President Evans indicated yesterday that if the outlook improved, interest rate hike speed might be sooner, and the US might be the most powerful economic entity. Evans also indicated he stood for twice rate hikes within this year. If he is convinced that inflation rate will return to 2% level, he will support further rate hiking. For the time point of rate hikes, he prefers "once in the mid-year, once at the end." Evans has always been hawkish among Fed, but in the process of market risk extending after the January meeting, his attitude begins to shift to dovish, and now backs to hawkish camp again. According to the federal funds rate futures, the probability of interest rate hike in April is only 5.8%, and 19% in June, still in the lower position.
From domestic side, PBOC reveals foreign exchange forward operating position data with commercial banks for the first time. By the end of February, short positions of forward and futures of foreign currency against domestic currency reported $ 28.9 billion notional principal. PBOC governor Zhou Xiaochuan indicated China would soon start publishing the SDR and dollar-denominated foreign assets which were hold by banking industry, included foreign exchange reserves, and would study issuing SDR-denominated bonds domestically. In addition, China National Bureau of Statistics will announce March manufacturing PMI data at 9 a.m. intraday. According to the estimated mid-value from Bloomberg surveyed on economists, the official manufacturing PMI was expected to rally from the four-year low point 49.0 in February to 49.4, but it still showed the shrank manufacturing industry for the eighth straight month. We recommend focusing on this data.
 
 
Stock Index
Yesterday stock index slightly fluctuated; among the Shenwan first class sectors, only transportation and building materials rose over 1%. From bullish side: Yellen made dovish speech and, US stock ended high; China as well had bull external environment to continue QE and fiscal incentive; special funds of construction at prior two quarters of this year totally planned RMB 1 trillion; ministry of finance: Chinese government debt ratio was about 40% and, should add the leverage properly; accelerated promoting PPP legislation, promoting more project to land; annual report of banks had issued and, bad debt ratio increased with small range; recent fiscal incentive, newly operated projects and, industrial profit revived showed a certain extend of positive factors, though it would not bolster to sharply revive, the fundamental on continuing retracement didn’t exist. Overall, this revive momentum was not strong, since the demand side management from government would boost the market; exchange rate was stabilizing, we recommend operating in volatile mindset.
 
 
Copper
Thursday copper price got bolster and, plenty of short holdings closed off. From fundamental side, LME spots premium increased $3 at $33.5, inventory continued decreased 700 tons. Tightened LME spots were still the bolster factor. Domestic copper were discount RMB 110 to discount RMB 50, asset was tight by the end of month. From the overall spots market condition perspective, copper price downward trend still got bolster from consumers’ buying momentum at the traditional peak season. In consideration of Qingming holidays is coming, we recommend considering risks on operating; technically, if intraday copper price fails to break though effectively, we tend to exit the market and stay in observation.

 
Soybean
DCE soybean was weak out of fluctuation; oil against meal ratio was 2.582:1. Domestic soybean downward trend continued, of which northeast area showed the largest downward range, the average price swiftly slipping after dropping below RMB 3600/ton at the beginning of the week and, current average price had dropped at RMB 3500/ton; market bearish momentum continued increasing.
From soybean meal side, spots quotation from most oil plants reduced RMB 20-40/ton. Spots trading were flat and, lower basis trading volume slightly increased. Pig price raised but, the pig breeding stock was hard to revive in a short term; aquaculture was hard to increase the fodder demand recently; soybean meal oversupply condition continued and, price was easy to drop and hard to rally. As for operation: sown area report meets the expectation; we recommend soybean No.1 contract and soybean meal holding long slightly; arbitrage between oil and meal staying in observation.
 
 
PP
Yesterday PP futures volatile in low and, opened at 6800 and ended at 6780; trading volume increased 506,000 lots to 1.229 million lots; holding increased 70876 lots to 526,000 lots. From spots side, yesterday domestic PP market price adjusted within interval and, partial quoted high. Petrochemical producer price bolstered the market price but, futures price dropped which impact the practitioner’s mindset, high quotation was less and, price was mainly in revise, real trading was thin.
Intraday main quoted prices for wires of north, east and south markets are RMB 7250-7400/ton, RMB 7350-7550/ton and RMB 7600-7700/ton, respectively.  
As for operation, current moving average system turned to downward; MACD green column extended as retrace pattern, recent price was estimated to continue weakening.

 
                                                                 Dong LV (Investment Certificate NO. TZ008452)