It's another week of "falling and falling".
Whether commodities have "peaked" and shown the "bear phase" is a topic of debate in the global financial market in recent times. However, the expansion of volatility has become the consensus of the industry.
Precious metals, non-ferrous metals and agricultural products fell sharply this week. As of the close of the morning, COMEX August gold futures fell 1.6% this week to $1801.50/oz; COMEX September silver futures fell 6.16% this week to close at $19.68 an ounce; LME copper fell 3.97% weekly to close at $8,048/ton, falling to a 17-month low; LME zinc was down 9.58% weekly; CBOT wheat futures were down 10.25% this week to close at $8.41/bushel; CBOT corn futures fell 9.94 this week to close at $6.07/bushel.
Affected by the second consecutive decline in OPEC crude oil production, international oil prices changed their trend, rising 3% intraday on Friday, and as of the close of the morning this morning, WTI August crude oil futures closed up 2.52% at $108.43 / barrel; ICE Brent September crude futures closed up 2.38% at $111.63 a barrel.
In terms of the situation in Russia and Ukraine, Russia confirmed that 77 civilian aircraft from various Russian airlines are currently detained abroad, and the United States announced that it will provide Ukraine with additional security assistance worth another $820 million.
The latest developments in the situation in Russia and Ukraine
1. 77 Russian aircraft were seized
According to CCTV News, on July 1, local time, Russian Transport Minister Vitali Saveliyev said that 77 civilian aircraft from various Russian airlines are currently detained abroad. He said that there are currently a total of 1158 civilian aircraft in Russia, and the overall situation is relatively stable.
Saveliyev also said That Russia's S7 Airlines may return two Boeing 737-8MAX aircraft to lessors in the near future.
2. Russian Deputy Foreign Minister: NATO's declaration that it regards Russia as the greatest threat is an all-out confrontation with Russia
Russian Deputy Foreign Minister Glushko said on the 1st that NATO's announcement of Russia as the biggest threat is an all-round confrontation launched by Russia.
According to TASS, Glushko said in a speech at the Russian think tank "Valdai" International Debate Club on the 1st that NATO regards Russia as the biggest threat, which is a very important change, which is to clearly declare a confrontation with Russia to contain Russia in all aspects.
Glushko said that the results of NATO's Madrid summit show that NATO has returned to the cold war-era military security model. Finland and Sweden's accession to NATO will lead to a deterioration of the military situation in the Baltic Sea region, which will be one of the "most tragic events" in the process of European security development. If Finland and Sweden join NATO, Russia will take appropriate measures to ensure security.
On June 29, nato leaders endorsed the NATO 2022 Strategic Concept at the Madrid summit, calling Russia the "biggest and immediate threat" to NATO. Russian Deputy Foreign Minister Ryabkov condemned NATO's irresponsible and undermining European security architecture on the same day, saying that NATO's decision at the Madrid summit will not affect Russia's policy.
3. NATO Secretary-General: Sweden and Finland signed the protocol to nato on July 5
NATO Secretary-General Jens Stoltenberg said at the end of the NATO summit in Madrid that the protocol for Sweden and Finland to join NATO would be signed on July 5, according to the Russian Satellite News Agency on June 30.
"The main political decision taken at the summit yesterday (June 29) was to invite Sweden and Finland," Stoltenberg said. The protocol to NATO will be formally signed next Tuesday (July 5) in the presence of the foreign ministers of Finland and Sweden. ”
The signing of the protocol of accession is a stage in the process of accession of new NATO members. The Protocol is in fact a complement to the Treaty and becomes an integral part of the Treaty when it is signed and ratified.
4. The United States will provide Ukraine with additional security assistance worth $820 million
According to CCTV News, on July 1, local time, the US Department of Defense announced that it would provide Additional Military Assistance of $820 million to Ukraine, including a new surface-to-air missile system and anti-artillery radar, and more ammunition for the "Haimas" highly maneuverable multiple rocket launcher system.
According to the report, the plan includes $770 million in Ukrainian security assistance program funding, allowing the Ministry of Defense to provide funds directly to contractors to provide weapons to Ukraine, and a $50 million presidential "withdrawal authorization" that allows weapons to be shipped out of U.S. stockpiles.
Since the outbreak of the Russian-Ukrainian conflict in February, the total value of U.S. security assistance to Ukraine has been about $6.9 billion.
Listed companies hedge futures account losses! Industry insiders: To be rational, the hedging effect should be comprehensively evaluated from both ends of the period
On the evening of July 1, Yongmaotai, a listed company, issued an announcement on the progress of carrying out futures hedging business. According to the announcement, the company held the eighth meeting of the second board of directors on March 10, 2022, deliberated and passed the "Proposal on Authorizing Management to Carry out Futures Hedging Business", in order to avoid the risk of price fluctuations of bulk metal raw materials such as aluminum, copper and nickel required for the production of the company and its subsidiaries, to ensure the relative stability of product costs, and at the same time, in order to prevent the risk of falling prices of aluminum alloy inventory commodities of the company and its subsidiaries, lock in the processing profits of products. The Board of Directors agreed to authorize the Company's management to carry out raw material and product futures hedging business within the initial trading margin limit of RMB100 million (the minimum trading margin stipulated by the Shanghai Futures Exchange, excluding temporary margin calls on holidays and pre-physical delivery margin calls) in the coming year. The proposal was approved by the Company's 2021 Annual General Meeting of Shareholders held on April 22, 2022.
Yongmaotai said that within the scope of the above authorization, according to the future production demand and procurement plan and the price prediction of aluminum, copper, nickel and other bulk metals, the company and its subsidiaries have successively purchased a corresponding number of aluminum, copper and nickel futures bullish contracts, and strictly implemented the company's "hedging management system" and risk control measures. However, due to the superposition of macro factors such as international geopolitical conflicts since 2022, the Shanghai epidemic, and the Fed's interest rate hikes, while having a greater adverse impact on the company's production and operation, production and sales, the price of bulk metal futures has fluctuated sharply, and the prices of aluminum, copper and nickel futures purchased by the company and its subsidiaries have shown a downward trend. On July 1, 2022, the Company received a notice from futures traders that from January 1, 2022 to the afternoon close of June 30, 2022, the futures accounts of the Company and its subsidiaries had accumulated losses of 40.3974 million yuan (including a floating loss of 15.1642 million yuan), and the impact on the profit and loss of the current year was -31.3355 million yuan.
In June, the price of non-ferrous metals plunged high, and the main contracts of Shanghai aluminum, Shanghai copper and Shanghai nickel fell by 8.26%, 11.28% and 17.10% respectively. Regarding the impact on the company, Yongmaotai said that due to the loss of the above-mentioned futures account, the company's profit and loss in 2022 will be -31.3355 million yuan. The impact of the above matters on the company's financial data has not been audited, and the specific and accurate financial data is subject to the audited data officially disclosed by the company, so please pay attention to the investment risks. In order to reduce the relevant risks, the company will strictly comply with the "Hedging Management System" and risk control measures, at the same time, in view of the current economic situation may lead to the risk of large fluctuations in the futures market, the company will strictly control the scale of funds in the futures hedging business, no longer transfer funds, and gradually reduce positions. At the same time, the company will strengthen the grasp and understanding of the policies of the state and related management agencies, effectively prevent, discover and resolve risks, and ensure that the funds for futures trading are relatively safe and will not affect the normal development of the company's business.
It is worth noting that Yongmaotai only disclosed the profit and loss of the futures account in the announcement, and did not disclose the profit and loss of the corresponding spot end. According to public information, Yongmaotai was listed on the Shanghai Stock Exchange on March 8, 2021, and its main business is the research and development, production and sales of automotive aluminum alloys and automotive aluminum alloy parts. According to the first quarter report of 2022, during the reporting period, Yongmaotai achieved operating income of 918 million yuan, an increase of 25.92% year-on-year; net profit attributable to shareholders of listed companies of 84.4634 million yuan, an increase of 25.99% year-on-year; net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses of 34.878 million yuan, down 23.34% year-on-year. The first quarterly report also shows that during the reporting period, Yongmaotai achieved investment income of 42.4215 million yuan, an increase of 125.97% year-on-year, mainly due to the increase in the profit of futures liquidation in the current period; the fair value change income was -5.2406 million yuan, down 1733.27% year-on-year, mainly due to the negative income of some of the futures positions at the end of the futures period.
Here, it should be noted that Yongmaotai only disclosed the profit and loss of the hedging futures account, and did not disclose the hedged items corresponding to the hedging in the announcement, nor did it further explain how much of the hedging was effective hedging and how much was invalid hedging.
"Based on the above disclosed information alone, we cannot judge the overall situation and overall effect of Yongmaotai's hedging in the first half of the year." Some industry insiders said that they hope that all parties in the market can objectively and rationally look at the above disclosure data, and also hope that Yongmaotai can disclose the situation of hedging hedged projects in more detail, so that the market can fully understand the situation and effect of the company's hedging business.
"In recent years, with the futures market price discovery and hedging risk two major functions continue to be recognized by enterprises, more and more listed companies actively participate in the hedging business, for some traditional industry giants, hedging has long become an important part of their operations, but in the actual operation process, many listed companies in the information disclosure will be performance thunder 'throwing pot' to hedging." Cheng Xiaoyong, director of the Boseong Futures Finance Research Institute, said in an article recently.
Cheng Xiaoyong believes that theoretically, the hedging of listed companies can be divided into effective hedging and invalid hedging, from the information disclosed by some listed companies, invalid hedging leads to a decline in the performance of listed companies is very common, and some listed companies have a huge amount of invalid hedging, but it makes hedging "back the pot", it is necessary to analyze the causes of invalid hedging of listed companies.
Cheng Xiaoyong said that there are mainly the following reasons for the ineffective hedging of enterprises: First, market characteristics (such as insufficient marketization) make it difficult to return to the current price difference; Second, the implementation of the hedging system is not effective, resulting in hedging becoming speculation; Third, the extreme change in the basis has led to a large amount of the invalid part of the hedging; Fourth, the calculation of net risk exposure is wrong, or the listed company encounters extreme market conditions to reduce (close positions) in advance, resulting in an imbalance in the proportion of hedged items and hedging tools.
In view of the above problems, Cheng Xiaoyong put forward several suggestions and countermeasures: First, listed companies should establish a sound hedging system; Secondly, for some special industries, such as commodities with strong monopoly and low degree of marketization (such as the price dual-track system), listed companies need to pay attention to the proportion of the marketization of futures contract targets and the return of the futures price difference in the process of participating in hedging; Third, pay attention to the adverse effects of changes in basis; Finally, listed companies should comprehensively consider the net exposure of raw materials, inventories and finished products in their hedging, rather than calculating the exposure separately, otherwise it will eventually lead to an imbalance in the proportion of hedged items and hedging tools.
Cheng Xiaoyong believes that the information disclosed by some listed companies shows that hedging has lost money. Among them, some of the losses may be hedging accounting problems, although it is a hedging business in business, but because some derivatives positions do not conform to the "Accounting Standard for Business Enterprises No. 24 - Hedging", they can only be included in investment income, resulting in current period losses. In addition, some listed companies have a large amount of invalid hedging in the current period, which may be included in the net income of fair value changes by some listed companies in accordance with Accounting Standard for Business Enterprises No. 24 - Hedging, or included in other comprehensive income as cash flow hedging reserves. If the current period is apportioned, this will also lead to a sharp decline or even a loss in the net profit of the current period.
OPEC crude oil production fell for the second consecutive month, and U.S. oil rose more than 3% during the day.
U.S. President Joe Biden is aggressively urging OPEC's largest members to ramp up production, while the group's supply has fallen for the second consecutive month. According to media surveys, OPCE's oil production fell by 120,000 bpd in June, the second consecutive month of decline. Among them, Nigeria's crude oil production fell to an all-time low. Affected by this news, WTI crude oil and Brent crude oil changed their decline, and the gains exceeded 3%.
As of the close of the morning, the price of light crude oil futures for August delivery on the New York Mercantile Exchange rose 2.52% to close at $108.43 per barrel; Brent crude futures for September delivery in London rose 2.38 percent to close at $111.63 a barrel.
Biden is urging Persian Gulf oil exporters to help reduce the threat to the global economy from soaring oil prices. In addition, the increase in oil supply in the Middle East has also helped to limit Russia's energy revenues.
The analysis believes that even the Gulf member states of OPEC have limited spare capacity. The latest monthly production data is yet another reminder that OPEC is also doing little to help curb oil prices.
Fears of a slowdown weigh on the outlook for demand, and international oil prices have continued to adjust from high levels for three consecutive weeks, showing their first monthly decline this year. However, market analysis believes that short-term oil price volatility will continue to amplify, but the tight global energy supply pattern will still bring key support to oil prices.
The European and American Bank of England and the United Kingdom are "eagles" in unison, and the high inflation dilemma is difficult to solve!
At the ECB's annual meeting this week, Fed Chairman Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Bailey gathered to discuss high inflation and monetary policy.
It is understood that the ECB currency holds an annual meeting in Sintra, Portugal, and invites big names in the monetary policy community to gather together, similar to the Federal Reserve's Jackson Hole annual meeting. About 200 central bank governors and economists gathered in Sintra this year to discuss how to deal with the risk of high inflation, and the three major central bank governors of the United States, the United Kingdom and Europe have spoken in unison that curbing inflation is the top priority at this stage, but central bank governors have also expressed doubts about whether the low inflation environment before the outbreak can return.
Fed Chairman Jerome Powell said: "Since the outbreak of the epidemic, we have been living in a world driven by very different factors." Globalization, an aging population, low productivity and technological developments, he explained, can no longer suppress inflation.
"So far, the past decade has been the peak of the anti-inflationary forces we are facing... The world seems to have disappeared now, at least for now. We now face different forces that must think about monetary policy in a very different way. Powell said it is not yet possible to judge whether high inflation will become the norm in the global economy, after all, economists' models have not previously been able to predict large supply shocks.
ECB President Christine Lagarde said: "The era of ultra-low inflation before the epidemic is unlikely to repeat, and we cannot go back." Lagarde said the energy shock had had a significant impact on inflation and suggested central banks adjust to significantly higher price growth expectations.
Lagarde said: "The change of times will herald more turmoil, which has now changed and may be constantly changing towards a system that we are not sure about." The huge shocks of geopolitics and the pandemic will change the environment and central bank-designed policies that we were once familiar with. ”
Bank of England Governor Bailey said, "The UK inflation data is ostensibly in line with central bank expectations, but there are signs that the composition of inflation is shifting from commodity supply shocks to energy and food shocks, which I describe as supply chain shocks in the post-pandemic era." We will observe this very carefully. ”
Inflation in the United States, the United Kingdom and the eurozone is now at decades-high levels and well above the inflation targets of central banks, and the three central bankers believe supply chain shocks are likely to continue as global trade and production patterns reset.
In addition to the focus on inflation, the three central bank governors also interpreted and prospected their own or regional economic growth prospects and monetary policies.
On the U.S. economic growth outlook, Powell reiterated that the U.S. economy is strong enough to cope with tight monetary policy, that households and businesses are in a sound financial position, and that the labor market is "very strong" and should avoid a recession. Powell said the Fed is committed to curbing inflation by raising interest rates without triggering a recession, while maintaining a strong and stable labor market and has great confidence in its goal of reducing inflation to 2 percent.
Powell also admitted that in the context of the sudden outbreak of conflict between Russia and Ukraine, the task of achieving a "soft landing" of the economy has obviously become more challenging in recent months, and a successful "soft landing" cannot be guaranteed. Powell warned that the longer high inflation persists, the path to a "soft landing" will become increasingly difficult, as it increases the likelihood that public inflation expectations will spiral out of control.
On the Outlook for European growth and money, Lagarde said the recovery is underway, particularly driven by the services sector, with the ECB expected to raise interest rates twice in the third quarter, including a 25 basis point hike in July and possibly a larger rate hike in September, a move that would end the ECB's negative interest rate policy of nearly a decade.
Lagarde warned that the ECB could act more decisively. "We are clear about the tendency towards monetary policy normalization, and the market's response is pushing for more selective central bank policies," she said. ”
With the ECB's July rate meeting approaching, Lagarde mentioning that the meeting will consider new tools to prevent the fragmentation of borrowing costs among eurozone countries, and financial markets have already priced the ECB's first rate hike in eleven years, investors are now focusing on whether the ECB can tighten monetary policy further in the medium term and what tools can be used to reduce inflation in the euro area.
According to the probability of interest rate hikes implied by short-term interest rate swaps in the euro area, the market expects the ECB to push interest rates to 1%, or 150 basis points, by the end of 2022, and further to 1.75% in the first half of 2023, which, if fulfilled, will bring the eurozone policy rate back to levels that were only before the European debt crisis and financial crisis.
On the BoE's movements, Pele said the BOE could choose to take "stronger action" on inflation, not ruling out a 50 basis point rate hike at a policy meeting a month later, provided "if there are continuing signs that rising prices are a problem".
Pele said britain's economic growth was slowing and that energy price capping measures could make inflation stubborn. If energy prices continue to rise, UK inflation will further intensify this year, now at its highest level in 40 years. "We are at the inflection point of the economic growth rate, and this stage is precisely the most difficult to read." Pele believes the market will have to accept that the UK economy is clearly starting to slow down and gradually digest the upside risk of rate hikes, and future data could be very volatile.
The "interest rate hike tide" is fiercely coming, and the risk of stagflation and recession has increased
"European and American central banks continue to misjudge inflation due to multiple issues such as geopolitics and the impact of the epidemic, triggering the current monetary policy decisions to be in and out of the ground, and the acceleration of overseas liquidity tightening in the second half of the year will be a foregone conclusion." Gu Fengda, head of the research and consulting department of Guosen Futures, said that the overseas market is currently in the highest intensity of the "interest rate hike tide" in decades, the "gray rhinoceros" risk of economic stagnation and even recession in the second half of the year is approaching, market pricing is accelerating to the crisis mode, the pressure of asset risk appetite tightening and retracement is extremely great, and it is necessary to focus on the adjustment of asset allocation when the market takes a sharp turn, especially overseas stock markets, bond markets and commodities should do a good job of exposure risk hedging and capital management.
Founder medium-term futures analyst Shi Jialiang said that the recent overall pressure on the commodity sector is mainly affected by macroeconomic policies, and the Fed's accelerated tightening of monetary policy and recession concerns are the core factors. On the one hand, the energy crisis, food crisis and supply chain crisis continue to plague the global economy, and the increasing cost of production and living has impacted global economic growth confidence; On the other hand, the Fed's acceleration of monetary policy tightening and suppressing inflation from the demand side will also have a greater impact on the economy. The recent weakening of US macroeconomic data such as supply and demand, PMI, and consumer confidence index all show that economic weakness is inevitable, and US recession fears have intensified, and even if it does not fall into recession, the possibility of the economy falling back more than expected is also greatly increased.
Recently, the World Bank and the OECD lowered their global economic growth forecasts to 2.9-3% for 2022 and 2.8-3% for 2023. By country, the US monetary policy will accelerate tightening in 2022, while geopolitical-induced energy crisis, supply crisis and inflation soaring and other factors will impact the US economy, the agency predicts that the US economic growth will accelerate to 2.5%-2.8% in 2022, and the possibility of a recession will not be ruled out in 2023; The European economy is facing the direct impact of insufficient economic growth momentum and geopolitical deterioration, superimposed on the impact of high inflation base and monetary policy tightening, and it is expected that GDP growth in the euro area will fall to 2.5%-3% in 2022, and the possibility of falling below 2.5% is not ruled out.
"Although Fed officials downplay the possibility of a recession, the probability of a U.S. recession is still high, both from macroeconomic data and the micro-performance of the U.S. economy, and recession concerns are still heating up, the future recession trading logic will continue, and in the next period of time, the commodity market will maintain an overall weak trend, and the strategy of short selling at a high level is still more appropriate." Shi Jialiang said.
Gu Fengda said that the risk of overseas economy stagnation in 2022 has been significantly improved, the Fed is forced to strengthen the impact of the interest rate hike cycle on overseas risk assets and real economic growth can not be underestimated, from many important indicators, the US economic prospects are "foreign strong in the middle", the actual income of its residents has turned negative year-on-year, and the relay income of consumer credit growth provides support for consumption. And forward-looking indicators show that the U.S. Treasury long and short end of the spread narrowed and many times inverted, reflecting the market's concerns about the U.S. recession continue to emerge, due to runaway inflation and the Fed interest rate hike impact on economic growth prospects, the latest U.S. Atlanta Fed GDP Now model forecast shows that the United States GDP growth in the second quarter or negative growth, the second half of the Year the United States also has the risk of transition from stagflation to recession, if the realization of two consecutive quarters of gdp negative growth during the year, the United States will officially enter the traditional definition of "recession" state.
The latest release of the US Core PCE Price Index for May was the smallest gain since last November, with the gains in the first four months being revised downward, and residential sales and manufacturing surveys also showed that the situation was not good, indicating that the US economic foundation was becoming more unstable. Notably, the gap between the CPI and PCE data in the U.S. is widening, with the May CPI inflation data recording 8.6%. The CPI is the inflation data that the public is more concerned about, while the Federal Reserve is the target of PCE data as monetary policy. Normally, the gap between the two is not important. But in unusual times, the widening gap between the two could undermine confidence that inflation will fade.
The JULY 1 CME "Fed Watch Tool" shows that the probability of financial markets raising interest rates by 75 basis points in July remains at a high of 83.2%, and the probability of a cumulative rate hike of 125 to 150 basis points in September is as high as 86.5%, which means that financial markets have almost determined that the Fed will aggressively raise interest rates by 125-150 basis points in the third quarter, and the possibility of further raising the us interest rate target ceiling in the future is not ruled out, which may have a serious impact on the US economic growth rate in the short term.
"High inflation is the primary contradiction facing the global economy in 2022, the developed countries led by the Federal Reserve have opened the interest rate hike cycle, after the fiscal stimulus effect subsided, the economy itself is facing downward pressure, and the way to raise interest rates to fight inflation is mainly to achieve by suppressing demand, and can not solve the problem of supply side, which will accelerate the rate of economic decline, inflation is expected to be slower than the economy." Orient Securities Futures analyst Xu Ying told reporters that after the recent decline in commodity prices, the inflationary pressure at the commodity level has eased, but the inflation pressure is comprehensive, durable goods and service prices are still rising month-on-month, which will make inflation have a certain stickiness, so it is expected that the overseas economy will experience stagflation, and then after the decline in demand is transmitted to inflation, it will follow a recession.
This article originated from Futures Daily
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