SMM News: since the second quarter of this year, affected by the weakness of the domestic economy, the resumption of the Sino-US trade war, superimposed demand season is not prosperous, copper-led basic metal trend into the downward channel. Entering the third quarter of the off-season consumption, most metals are starting a journey to the bottom. Recently, copper and lead in Shanghai have reached two-year lows, while zinc and tin in Shanghai have both refreshed their lows for more than two and a half years. It seems that at a time when there is no way out, the two major macro events have ushered in a breakthrough in recent days, can non-ferrous metals be bright in the dark?
Good news from Sino-US trade negotiations
Since the start of the trade war last year, progress, whether worsening or picking up, has more or less affected the trend of metals. At the G20 summit at the end of last month, although the heads of state of China and the United States agreed to restart economic and trade talks, there was no substantial progress in the negotiations within a short period of time, optimism in the financial markets quickly faded, and investors focused on weak demand for metals.
This week, the leaders of the high-level economic and trade consultations between China and the United States began talking. Subsequently, a spokesman for the Ministry of Commerce said that the economic and trade teams of the two countries will resume economic and trade consultations on the basis of equality and mutual respect in accordance with the requirements of the Osaka meeting between the two heads of state. The United States, for its part, announced that it would waive high tariffs on 110 Chinese products, from medical equipment to key capacitors. In this regard, the Chinese side also indicated that it has established a corresponding tariff exemption mechanism. The Sino-US economic and trade team is maintaining communication on the next specific arrangements, and both sides have softened their attitude, the prospect of trade negotiations is promising, and the financial markets are jubilant, providing a considerable boost to the rebound in metal prices.
The implication of the Fed cutting interest rates is getting stronger and stronger.
The June non-farm data released last week improved sharply, and while Trump is still urging the Fed to cut interest rates, the strong jobs data at one point raised concerns about whether the Fed would cut interest rates quickly. After Powell's testimony in Congress and the release of the minutes of the Fed meeting, extremely dovish comments landed a boulder in the minds of investors, and it seems certain that the Fed will cut interest rates later this month.
Since the beginning of this year, global monetary policy has gradually entered a cycle of interest rate cuts. On the domestic side, although the market is relatively liquid at present, the downward pressure on the economy remains unabated, and the Sino-US trade negotiations are still uncertain. The meeting of the State Council pointed out that it is necessary to deepen the market-oriented reform of interest rates and reduce the financing costs of small and micro enterprises. In order to stabilize domestic economic growth and resolve external risks, the smooth landing of the Federal Reserve interest rate cut will undoubtedly push up the expectation of the people's Bank of China to cut interest rates.
At present, Sino-US economic and trade relations have further broken the ice, the door for the Federal Reserve to cut interest rates is about to open, and market risk appetite has increased significantly. The central bank's monetary space is expected to expand further, boosting domestic financing demand and boosting domestic economic prospects, thereby boosting commodity prices. If there are no other unexpected pessimistic events on the macro side in the near future, the colored plate, which has fallen to a phased low, will undoubtedly usher in a phased rebound.