Futures Weekly 丨 Monetary policy tightening in many countries in Europe and the United States, recession expectations heated up, copper prices fell by 20%, metal demand fell fears rose, and pig prices still rose

Southern Finance and Economics all-media reporter Weng Rongtao intern Sun Yongle reported in Guangzhou

This week (July 4-July 8), the monetary policy of central banks in Europe and the United States tightened, triggering a sharp rise in market recession expectations, and commodities showed a sharp downward trend.

In terms of domestic futures performance, financial market sentiment was pessimistic again this week, and commodity prices fell back. The trend of various sectors is sluggish, and the price of live pigs continues to rise.

Specifically, in the energy and chemical sector, crude oil futures fell 2.66% during the week, fuel fell 11.98%, and LPG fell 2.21%; In the black sector, coke fell by 2.43% and coking coal by 3.27%; Non-ferrous metals sector, Shanghai copper fell 4.33%, Shanghai nickel fell 2.54%; In the agricultural products sector, soybean oil and palm oil fell sharply by 5.87% and 7.79% respectively, cotton fell by 4.91%, and pigs continued to rise by 7.32%.

Trading Quotes Hot Spots:

Hot spot one: Copper prices have fallen by 20%, and global economic growth is likely to slow down

The data shows that the price of copper in the LME period just fell below the $8,000/ton mark last week, for the first time since the beginning of 2021; Throughout the second quarter, a basket of industrial metals traded in London recorded its worst single-quarter performance since the 2008 global financial crisis. With warnings of a global recession looming, almost all industrial metals are under pressure right now.

The prices of many raw materials are still at historically high levels, but prices are indeed falling back and are still in a downtrend. Some investors have begun to see the reversal as a sign that the Fed's rate hikes are reducing demand. However, despite the recent pullback in commodity prices, some views remain that commodities are a safe investment option due to the misery of global equities and bond markets in the first half of the year.

Lee Hardman, an exchange rate analyst at Mitsubishi Nikka Financial Group, noted that "the price of copper is considered a good leading indicator of global economic growth, but in recent months it has fallen by about 20 percent." In recent history, a similar decline or a greater sell-off has only occurred at a few moments, including during the coronavirus outbreak in early 2020 and the 2008 global financial crisis. ”

Hot spot two: the halo of commodities has faded, and hedge funds are scrambling to turn over

Commodity prices have taken a sharp turn from all-time highs and hedge funds have pulled out bullish bets on varieties such as corn, copper and oil, the latest sign of heightened recession fears in financial markets. Hedge funds have been a central force driving commodity prices down recently, selling long positions and replacing them with put options.

David Whitcomb, head of research at research firm Peak Trading Research, said that while spot supply of many raw materials remains tight, "hedge funds are pulling out of their money and they are leading the market to a lot of liquidation." ”

Aspect Capital, a well-known overseas private equity fund with $10.6 billion in assets under management, has been shorting commodities such as copper, silver, iron ore and steel since around early May as they expect the global economy to slow and drag down commodity price movements. In the agricultural sector, the company has been shorting sugar and cocoa for some time and has recently opened a small short position on wheat.

Hotspot three: supply release, palm oil fell by 30% in the past month

Recently, the oil and fat market is weak to run, in just one month palm oil cumulative decline of more than 30%, soybean oil and vegetable oil cumulative decline of more than 25%, soybean meal is relatively the most resistant to falling, the cumulative decline is also more than 13%.

Hou Xueling, an oil and oil analyst at Everbright Futures, said that the weakness of the market is caused by many aspects. First, the Fed raised interest rates more than expected, increasing recession concerns and tightening fears, and the bulls withdrew from the oil and fat market; Secondly, Indonesian palm oil resumed exports, and the export stimulus policy increased layer by layer, and low-priced palm oil hit the market and dragged down the oil; Third, in the stalemate of the Russian-Ukrainian conflict, but the expected increase in the resumption of grain transportation, which can be verified from the increase in russian-Ukrainian grain and sunflower exports exceeding expectations, the withdrawal of Russian and Ukrainian ports under the coordination of the United Nations, the imminent opening of export humanitarian channels, and the further withdrawal of the market from the increase brought about by the Russian-Ukrainian conflict; Finally, the demand side is cautious, buy as you go, as the price plummets, the demand side is cautious, buy as you go, the market transaction is sluggish, the demand is frozen, and the limited demand is greatly reduced.

Industry Policy Highlights:

Important news one: China's economic semi-annual report was released, and the CPI\PPI ran smoothly in the first half of the year

The National Bureau of Statistics released on the 9th that on average from January to June this year, the national consumer price index (CPI) rose by 1.7% over the same period last year, the industrial producer price index (PPI) rose by 7.7% over the same period last year, and the PPI increase fell for 6 consecutive months. The overall situation of epidemic prevention and control in the mainland is stable and improving, the supply of important people's livelihood commodities is sufficient, the supply chain of key industrial chains is gradually smooth and stable, and the operation of consumer prices is generally stable.

On average, the January-June CPI rose 1.7% year-on-year. Among them, food prices rose by 2.9%, an increase of 0.6 percentage points from the previous month, and pork prices fell by 6.0%. In the first half of the year, the PPI rose by 7.7% over the same period last year. In June, the PPI rose 6.1% year-on-year, an increase of 0.3 percentage points from the previous month, and the PPI increase has fallen for six consecutive months this year.

Looking forward to the second half of this year, Guo Liyan, director and researcher of the Comprehensive Situation Office of the China Macroeconomic Research Institute, said that prices do not have the basis for sustained sharp rises, so we currently judge that CPI is expected to run in a reasonable range in the second half of the year. Recently, international commodity prices have fallen, while the effect of domestic supply and price stabilization has also continued to appear, and we expect the PPI to continue to decline.

Highlight 2: The pilot work of the CSRC was launched, and the private equity venture capital fund distributed shares to investors in kind

According to the news on the website of the China Securities Regulatory Commission on July 8, in order to improve the non-cash distribution mechanism of private equity funds and venture capital funds (hereinafter referred to as private equity venture capital funds), broaden the exit channels of private equity venture capital funds, and promote a virtuous cycle of investment-exit-reinvestment, the CSRC recently launched the pilot work of private equity venture capital funds to allocate shares in kind to investors.

The pilot work of private equity venture capital funds to allocate shares in kind to investors is another important measure for the CSRC to promote the optimization of the development environment of private equity venture capital funds and support the industry to further serve the real economy. The CSRC will timely summarize and evaluate the practice of the pilot work, continue to promote the improvement of the exit mechanism of private equity venture capital funds, guide and promote the standardized development of private equity venture capital funds, and increase the intensity of serving the real economy.

Looking forward to future performance:

Energy and chemical sector:

Fuel oil: On the fuel oil supply side, the decline in Russian high-sulfur fuel oil exports is relatively limited, which has contributed to the continuous decline in high-sulfur prices. The third quarter is about to enter the peak season of demand for refined oil products in the northern hemisphere, and gasoline and diesel prices are expected to continue to run at a high level and continue to suppress the supply of low sulfur. On the other hand, Russia's natural gas supply to Europe has decreased significantly, and the main export facilities of LNG in the United States will be overhauled for a long time, and European gas prices are expected to remain high, which will also raise the cost of low-sulfur production. (CCB Futures)

LPG: On the cost side, international oil prices fell sharply during the week, with Saudi CP falling $25 month-on-month in July, and arrival costs falling to the 5700-5800 range, which is an effective resistance level for the August contract. On the supply side, domestic supply fell by 0.45% month-on-month, and the load of Shandong refining remained near 69.2%; On the import side, domestic imports continued to hang upside down, and the arrival forecast decreased. Weekly U.S. propane exports rose sequentially and were on the higher side year-on-year. On the demand side, alkylation profit rose month-on-month, but the start of construction fell sharply; MTBE starts are expected to hold steady at a high level; PDH plant starts are low and expected to rise. The demand for civil market is weakly affected by high temperatures. Overall, weekly LPG demand rose sequentially. In terms of inventory, the port inventory was 1.7001 million tons this week, -1.3% month-on-month, and the market is still expected to go to the warehouse. Refinery inventory pressure is mainly reflected in South China and Shandong. In summary, this week's LPG supply and demand increased, the weak demand for civil gas dragged down the market center of gravity, and overseas import costs also fell due to oil prices. (Shanghai East Asia Futures)

Black Plate:

Coking coal: in terms of the market, the recent coking coal just needs to weaken in the short term, the market wait-and-see sentiment increases, traders and other speculative demand wait-and-see, yesterday's online auction transaction price fell slightly, and some resources have a flow auction phenomenon. On the supply side, under the guidance of the policy of increasing production and supply, domestic production is expected to increase, the profit of maritime coking coal is repaired in the short term, the number of customs clearances for imported Mongolian coal continues to increase but the short-term impact of the epidemic is uncertain, and the overall supply of coking coal has improved, but it is necessary to pay attention to the continuity of the increment. On the demand side, the downstream inventory is low, the molten iron peaked and fell, but the overall is still at a high level, just need to have support, but the negative feedback of steel mills is still there, while still facing policy pressure production, coking coal long-term demand is not optimistic, short-term attention to whether the steel table needs to pick up is sustainable. In terms of inventory, the overall inventory of coking coal is still at a historically low position, which supports the phased price.

Overall, the current coking coal inventory is low, the molten iron is still high, and the reality is supported, but the supply is gradually improving, and the steel mills are reducing production, forcing the price of coking coal to be reduced. In terms of futures, the disk surface hovers near the support level of Mongolian coal costs, the recent steel watch demand is still good, but the recent transaction is more of an overseas recession risk, coupled with the outbreak of the domestic epidemic again, the recovery of black demand is once again facing pressure, short-term suggestions to wait and see, the medium term can pay attention to the profits of multiple steel mills. (Pioneer Futures)

Non-ferrous metal plates:

Shanghai nickel: Prices fell again during the week this week, mainly worried about economic growth and the Fed's interest rate hike in July. From the supply side, domestic production recovered rapidly, imports increased, and supply was relatively sufficient. On the demand side, the stainless steel industry chain has reduced production, the demand for nickel iron has declined, and the procurement of nickel plates has been reduced (cost factors), and the new energy industry chain has sold nickel beans (intermediate products and high ice nickel economy is better). Recently, when the price is low, some just need to purchase enthusiasm is higher. The short-term line shows the current situation of strong supply and demand, but the long-term surplus situation remains unchanged, and supply and demand are still weak. (Otsu Futures)

Agricultural products:

Pigs: The current temperature is higher, the diet is light, the consumer demand for pork is limited, and the downstream acceptance of continuous price increases is limited. In addition, the government interviewed major breeding enterprises to ensure stable supply and production, limit the situation of pressing the fence, or hit the plate surface. At the same time, the National Development and Reform Commission also interviewed futures exchanges and proposed that pig reserve meat may be released in the later stage to adjust prices. However, at present, small and medium-sized enterprises still have a certain sentiment of selling, limiting the supply of live pigs. From the perspective of futures disk, pig prices have reached a new high, but under the regulation of the policy side, the possibility of pig prices continuing to rise sharply is limited. (Ruida Futures)

Cotton: Zhengmian is still consolidating at a low level this week. The US Xinjiang cotton ban has a huge impact on the domestic market, and the Bangladesh Garment Association also requires domestic textile companies to use Xinjiang cotton cautiously. Although the market is currently speculating about the hot spot of Biden's plan to cancel tariffs on China, it is affected by the Xinjiang cotton ban policy, and even if the tariffs are canceled, the degree of benefit is limited. The State Reserve Cotton issued an announcement that it plans to rotate in reserve cotton when the spot price is not higher than 18600 yuan / ton, and the main purpose is still to boost market confidence and stabilize cotton prices. At this stage, the new cotton is growing well and is expected to be a good production year. The overall operating rate of the downstream is still not high, although the price has fallen, but affected by the poor situation of terminal orders, textile companies dare not rush to purchase a large number of warehouses, and they just need to replenish the warehouse and digest the previous inventory. (Huaan Futures)

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