Copper prices sharply fall short of short-term policies
Both domestic and foreign copper prices have recently fallen, hitting the biggest weekly drop since July of this year, with a drop of more than 2%. The domestic forecast of monetary tightening and the dollar rally have become the trigger for the short-term crash.
The domestic and international macro environment has undergone dramatic changes in the short term: the turmoil in the DPRK and South Korea has intensified, the country has raised reserves twice in a row, the European Ireland crisis has rekindled, commodities have been sold off, and the US dollar has again become a hedge stock. After setting a new historical high, Lonco copper quickly fell back to the slow-rising market since July and revisited the current fundamentals. The rise caused by inflation expectations has ended under the influence of China's rate hike expectations, but the topic of inflation has ended. Far more than near worry.
Korean turmoil added mutability Korean Ministry of National Defense press office reported to Xinhua News Agency on the afternoon of November 23 that near the Yeonpyeong Island in the western part of South Korea near the controversial “Northern Line†between South Korea and North Korea, it was shelled at 14:30 on the same day. * The team made a comeback. A press communique issued by Pyongyang’s Supreme Command of the Korean People’s Army said in the same day that the Korean People’s Army had taken resolute military measures on the same day to counter South Korea’s military provocations to launch artillery shells on the Korean territorial waters. Affected by this incident, the international exchange market, stock market, bond market and futures market were all shaken. The market has a strong risk aversion. With the increase of economic uncertainty in the euro zone, the strong upward trend of the U.S. dollar has been basically determined. This geopolitical risk has aggravated market concerns and demand for safe-haven funds will continue to benefit the U.S. dollar. Commodities suffered a sell-off. London copper fell by $112.5 to $8153.5/ton on the day and focused on events later in the day.
The central bank continued to raise reserves to curb inflation. On November 11, the National Bureau of Statistics announced that the CPI for October increased by 4.4% from the previous year, which was higher than the market consensus of 4.0%, and the PPI increased by 5.0% from the previous year, which was higher than the market expectation of 4.5%. Although this CPI was mainly driven by the rising prices of agricultural products, the factors that have caused inflation recently have shown signs of structural transformation. From the perspective of money supply, M2 increased by 19.3% year-on-year, M1 increased by 22.1% year-on-year, and the scissors of M2 and M1 showed signs of reversal, indicating that the liquidity in the market was still sufficient.
To cope with the current liquidity, the People's Bank of China announced on the evening of November 10 that it had raised the reserve requirement for financial institutions by 50 basis points and passed the policy guidance of the central bank to tighten liquidity. On the evening of November 19, it was decided that starting from November 29th, the deposit reserve ratio of deposit-taking financial institutions should be raised by 0.5%. This is the distance from the last announcement of raising the deposit reserve ratio for only 9 days. This policy highlights the government’s determination to strictly control the price. The incentives for raising the reserve ratio are hot money inflows and high credit. Continuous injection of liquidity leads to continued price increases. The precondition for recovering liquidity is that China’s economy has stabilised, and high-growth in 2010 has no worries. Management inflation expectations have become the most important at present. task.
Two consecutive raises in reserve are aimed at strengthening liquidity management and tightening currency liquidity. Based on a rough estimate, based on the balance of deposits in China at the end of October of RMB 70.28 trillion, the two deposit reserve ratios will be raised by one percentage point, and will directly freeze over RMB 700 billion, affecting more than 70 trillion bases. Very little.
The readjustment of reserve funds has reached the highest level in domestic history, highlighting the sense of urgency for liquidity recovery after excessive domestic currency issuance. If such a super currency crisis is not contained in time, the possibility of inflation in the latter period is extremely high. It is true that after two increases in reserve requirements, inflation concerns remain. Liquidity problems are simply not sufficient. The combination of monetary policy is not too short in the short term. If the market expects China to enter the interest rate hike cycle, there will be two On the other hand, first, the recovery of China’s economic recovery from the quantitative easing monetary policy is unlikely to continue. Second, hot money with a strong gambling appreciation will accelerate the inflow. The first two points are justifications for not being able to adopt a continuous rate hike policy. The stability and continuation of monetary policy will escort the domestic economy to a smooth transition. Therefore, we expect the central bank to raise interest rates in the short term, but the continuing tightening policy will not come.
Future Outlook From the perspective of the international environment, due to the continued depreciation of the US dollar in the previous phase and the recent introduction of the second round of quantitative easing by the Fed, the international oil prices, international gold prices, and commodity prices have risen rapidly. The loose liquidity in the market has caused the future. Expectations of rising prices have led to the recent escalation of the hoarding and grabbing of raw materials such as minerals and non-ferrous metals, which has led to increased pressure on imported inflation. The Chinese government’s continuous increase in reserves shows that the country’s determination to curb inflation has caused a certain degree of volatility in the market.
In addition, from November 5 to November 16, the continuous upward trend of the US dollar was more eye-catching. The U.S. dollar index rebounded from 75.8 to 79.4, and the U.S. dollar went under pressure to suppress the commodity market. We know that starting from September, the quantitative easing policy of the United States is the subject of the market's core speculation, and consensus has been reached on the US dollar's strategic devaluation market. In addition to the mid-term U.S. elections held in early November, the Party’s total defeat, economic recovery, and stimulating the recovery of the job market have become core elements of the Party’s work in the next two years. Pulling exports, the area that has dragged the U.S. economy behind, is to boost U.S. GDP in the future. And the inevitable choice of the job market, for a post-industrial country, the United States, through the devaluation of the currency to enhance the competitiveness of products is a more "smart" decision. Therefore, we believe that the US dollar should be dominated by strategic devaluation in the later period.
The current financial environment and macro-environment are unprecedentedly complex, but one thing is certain that the ability of central banks to control the economy is much stronger than that of the great crisis of 1929. Traditional economic theories cannot interpret the current laws of economic operation well. Whether or not the use of reasonable monetary policies to control the economy has become the focus of central banks in all countries. The current situation is that under the background of quantitative easing policies, inflation is unavoidable, and reasonable guidance of liquidity will serve the real economy and enhance the ability of the financial market to absorb gold to ease inflation. speed. For the copper market, the supply and demand side is still strong, and financial attributes dominate the market in the short term.
The domestic and international macro environment has undergone dramatic changes in the short term: the turmoil in the DPRK and South Korea has intensified, the country has raised reserves twice in a row, the European Ireland crisis has rekindled, commodities have been sold off, and the US dollar has again become a hedge stock. After setting a new historical high, Lonco copper quickly fell back to the slow-rising market since July and revisited the current fundamentals. The rise caused by inflation expectations has ended under the influence of China's rate hike expectations, but the topic of inflation has ended. Far more than near worry.
Korean turmoil added mutability Korean Ministry of National Defense press office reported to Xinhua News Agency on the afternoon of November 23 that near the Yeonpyeong Island in the western part of South Korea near the controversial “Northern Line†between South Korea and North Korea, it was shelled at 14:30 on the same day. * The team made a comeback. A press communique issued by Pyongyang’s Supreme Command of the Korean People’s Army said in the same day that the Korean People’s Army had taken resolute military measures on the same day to counter South Korea’s military provocations to launch artillery shells on the Korean territorial waters. Affected by this incident, the international exchange market, stock market, bond market and futures market were all shaken. The market has a strong risk aversion. With the increase of economic uncertainty in the euro zone, the strong upward trend of the U.S. dollar has been basically determined. This geopolitical risk has aggravated market concerns and demand for safe-haven funds will continue to benefit the U.S. dollar. Commodities suffered a sell-off. London copper fell by $112.5 to $8153.5/ton on the day and focused on events later in the day.
The central bank continued to raise reserves to curb inflation. On November 11, the National Bureau of Statistics announced that the CPI for October increased by 4.4% from the previous year, which was higher than the market consensus of 4.0%, and the PPI increased by 5.0% from the previous year, which was higher than the market expectation of 4.5%. Although this CPI was mainly driven by the rising prices of agricultural products, the factors that have caused inflation recently have shown signs of structural transformation. From the perspective of money supply, M2 increased by 19.3% year-on-year, M1 increased by 22.1% year-on-year, and the scissors of M2 and M1 showed signs of reversal, indicating that the liquidity in the market was still sufficient.
To cope with the current liquidity, the People's Bank of China announced on the evening of November 10 that it had raised the reserve requirement for financial institutions by 50 basis points and passed the policy guidance of the central bank to tighten liquidity. On the evening of November 19, it was decided that starting from November 29th, the deposit reserve ratio of deposit-taking financial institutions should be raised by 0.5%. This is the distance from the last announcement of raising the deposit reserve ratio for only 9 days. This policy highlights the government’s determination to strictly control the price. The incentives for raising the reserve ratio are hot money inflows and high credit. Continuous injection of liquidity leads to continued price increases. The precondition for recovering liquidity is that China’s economy has stabilised, and high-growth in 2010 has no worries. Management inflation expectations have become the most important at present. task.
Two consecutive raises in reserve are aimed at strengthening liquidity management and tightening currency liquidity. Based on a rough estimate, based on the balance of deposits in China at the end of October of RMB 70.28 trillion, the two deposit reserve ratios will be raised by one percentage point, and will directly freeze over RMB 700 billion, affecting more than 70 trillion bases. Very little.
The readjustment of reserve funds has reached the highest level in domestic history, highlighting the sense of urgency for liquidity recovery after excessive domestic currency issuance. If such a super currency crisis is not contained in time, the possibility of inflation in the latter period is extremely high. It is true that after two increases in reserve requirements, inflation concerns remain. Liquidity problems are simply not sufficient. The combination of monetary policy is not too short in the short term. If the market expects China to enter the interest rate hike cycle, there will be two On the other hand, first, the recovery of China’s economic recovery from the quantitative easing monetary policy is unlikely to continue. Second, hot money with a strong gambling appreciation will accelerate the inflow. The first two points are justifications for not being able to adopt a continuous rate hike policy. The stability and continuation of monetary policy will escort the domestic economy to a smooth transition. Therefore, we expect the central bank to raise interest rates in the short term, but the continuing tightening policy will not come.
Future Outlook From the perspective of the international environment, due to the continued depreciation of the US dollar in the previous phase and the recent introduction of the second round of quantitative easing by the Fed, the international oil prices, international gold prices, and commodity prices have risen rapidly. The loose liquidity in the market has caused the future. Expectations of rising prices have led to the recent escalation of the hoarding and grabbing of raw materials such as minerals and non-ferrous metals, which has led to increased pressure on imported inflation. The Chinese government’s continuous increase in reserves shows that the country’s determination to curb inflation has caused a certain degree of volatility in the market.
In addition, from November 5 to November 16, the continuous upward trend of the US dollar was more eye-catching. The U.S. dollar index rebounded from 75.8 to 79.4, and the U.S. dollar went under pressure to suppress the commodity market. We know that starting from September, the quantitative easing policy of the United States is the subject of the market's core speculation, and consensus has been reached on the US dollar's strategic devaluation market. In addition to the mid-term U.S. elections held in early November, the Party’s total defeat, economic recovery, and stimulating the recovery of the job market have become core elements of the Party’s work in the next two years. Pulling exports, the area that has dragged the U.S. economy behind, is to boost U.S. GDP in the future. And the inevitable choice of the job market, for a post-industrial country, the United States, through the devaluation of the currency to enhance the competitiveness of products is a more "smart" decision. Therefore, we believe that the US dollar should be dominated by strategic devaluation in the later period.
The current financial environment and macro-environment are unprecedentedly complex, but one thing is certain that the ability of central banks to control the economy is much stronger than that of the great crisis of 1929. Traditional economic theories cannot interpret the current laws of economic operation well. Whether or not the use of reasonable monetary policies to control the economy has become the focus of central banks in all countries. The current situation is that under the background of quantitative easing policies, inflation is unavoidable, and reasonable guidance of liquidity will serve the real economy and enhance the ability of the financial market to absorb gold to ease inflation. speed. For the copper market, the supply and demand side is still strong, and financial attributes dominate the market in the short term.