Daily Report 040516 2016-05-04
Macro Economy
US stock dropped to the lowest point of three weeks, global economy prospective anxiety and bad enterprise performance encumber the market. S&P 500 index dropped 18.06 point or 0.87% to 2063.37 point. From news sides, Atlantic Fed president Lockhart claims that the market might under estimate the probability of June interest rate hike. June conference still depends on data. From prior analysis, if US economy output and inflation data turns better, the Fed’s activity might be accidental to market, and creates turbulence. San Francisco Fed president John Williams claims that although US first-season economy increase rate is low, he still expect interest hike within the year. At present, it seems appropriate to increase the interest rate during the meeting in June. But Williams suggests that it should be not inevitable and he warns that a number of things could happen before the meeting in June. The statements from the two tend to be hawkish. But since they are not among voting members of Federal Open Market Committee this year, its impact to the market should be quite limited. The US Dollar Index progressively rebounds after hitting the bottom at 92. By the current view, the US Dollar will see a technical rebound after sustaining pressure in the early period. Meanwhile, it seems that the US Dollar poses limited threaten to the commodity market before the Federal Reserve increases the interest rate.

Tuesday copper market was weak, and new short position entering market lowered the price. From Macro perspective, Tuesday US dollar index was strongly bolstered. Recently weak US data and stronger US dollar might be risk-resistant demand. At the mean time, two Fed presidents in favor of interest hike also boost US dollar. If US index will back to above average 5, then the obstacle of copper price drop will disappear. From fundamental side, Tuesday LME spots are weak, and spots discount decreased to $8.25, which is lowest since March. Storage increases 5175 tons. Domestic spots are also weak. Considering April China consumption is under expectation, and May is the end of consumption season; consumption will be worse. From supply side, by the end of first-quarter, a series of new mines will release production capacity. Copper mine process cost increases significantly. From Bloomberg, April increased 6% to $95, which shows supply pressure is also increasing; copper market still under supply surplus. Technically, if LME is less than $4873, domestic price will break through RMB 37000, copper price downward tendency will be clear.

Domestically, DCE soybean rallied in the night session followed the overseas market; oil against meal ratio is at low level. During holidays soybean price of northeast China and along Huaihe river increases, purchase price on filtered soybean in North and South central China of Heilongjiang raises to over RMB 3800/ton, sell market price increases following the production area, but market reflection is flat. Dealers adjust prices passively, but dealings are still tepid. Pay attention to later period surplus grain volume and state reserve soybean auction factor.
From soybean meal side, spots price slightly increased RMB20-50/ton, and market purchase and sell momwntum is weak. This month port soybean volume is huge, and oil plant maintain high operation rate, then soybean meal storage accumulated. It’s expected that near the mid-term spots price will drop back under pressure, and before this, soybean meal price will stay strong. As for operation: reduce soybean meal long holdings and, arbitrage between oil and meal observe temporarily.

Yesterday PP futures opened flat and went lower, opened at 6950 and ended at 6834, trading volume decreased 127000 to 0.69 million lots, and holding increased 4720 to 562000 lots. From spots side, yesterday domestic PP market price decreased RMB50-100/ton. Futures dropped intraday, which affected spots market. Market investment and trading atmosphere is weak, and buyers are mainly observation. Traders sell actively, and trade with price surrender. Intraday main quoted prices for wires of north China, east China and south China markets are RMB 6800-7000/ton, RMB6850-7050/ton and RMB6900-7050/ton, respectively. As for operation, current moving average system changes to downward as retracement pattern and we tend to recent price will fluctuate in weak tendency.
                                                                                   Dong LV (Investment Certificate NO. TZ008452)