Affected by the news of multiple bad events in Europe and America, domestic and foreign financial markets fell sharply last week. The Dow Jones Industrial Average fell 6.41% in one week, the biggest drop in a single week since the beginning of this year; LME's main varieties (except LME aluminum) have fallen more than a single week. 10%. The domestic commodity futures market has not been spared. On September 23, the major contracts of the major non-ferrous varieties of the Shanghai Futures Exchange fell below the threshold. As for the steel market, the previous market's expectation of Jin Jiuyin 10 was completely frustrated. Just last week, the Q235 billet price in Tangshan fell by RMB 170/ton, and the average national price of rebar and wire rod also dropped by RMB 121/ton respectively. And 102 yuan / ton. Overall, the negative factors in the current market dominate, the European debt crisis is difficult to improve in the short term, the dollar has become the only safe-haven tool, copper will have a negative impact on people's mentality, which will cause the domestic steel market in the short term market Difficult to pick up.
First, the main reasons for the collapse of financial markets 1. The overall economic slowdown in Europe and the United States, the probability of the global economy "double bottom" increased since the second quarter of this year, Europe and the United States economy continued to slow down. U.S. non-agricultural employment in the United States in August showed zero growth, for the first time after World War II, the consumer and real estate markets continued to slump. Following the S&P downgrade of US sovereign debt, Moody’s lowered the bond ratings of the three major US banks (Bank of America, Citibank, and Wells Fargo) on the 21st. The fear of the U.S. economy returning to recession is gradually increasing. In Europe, the economic growth rate slowed down significantly in the second quarter. Leading indicators were low in innovation. In September, the euro zone's consolidated PMI fell below 50 (49.2) for the first time since August 2009. As the financial tightening of countries in the euro area increases, the economic growth of the countries in the euro zone will continue to slow.
2. The Fed launched a "reverse" operation with 400 billion yuan, and QE3 is expected to fail to take into account domestic inflationary pressures and debt problems. The Fed did not launch QE3 at the September interest-rate meeting, but adopted a "reverse" operation (according to the end of June 2012, purchases). The US$400 billion U.S. treasury bonds with a term of 6 to 30 years, while selling equal amounts of treasury bonds with a term of less than three years, stimulate the economy. This will help lower medium and long-term interest rates and boost real estate consumption and investment. But at the same time, it will push up short-term interest rates, which in turn will push the dollar higher in the short term and suppress the upward movement of commodity prices. Since the release of the Federal Reserve’s interest rate statement on the 21st, the US dollar index has rushed to 78.80 at the highest level, which has become an important reason for the sharp decline in financial markets in the last two days of the week.
3. The slowdown in the domestic economic growth and the easing of monetary policy in the short term, under the backdrop of macroeconomic policy tightening, continued slowdown in domestic economic growth. Although investment in fixed assets continued to grow steadily from January to August, investment in the railway transportation industry fell by 15% year-on-year. In terms of real estate, real estate development investment and newly started construction areas both declined in the month of August, indicating that the real estate investment in the later period may further slow down. At the same time, under the influence of stringent regulatory policies, housing prices in the first-tier cities began to gradually fall. In August, the price index of newly-built commercial housing increased significantly compared to the same period last year. In the later period, with the introduction of the second- and third-tier cities restrictions on purchase, the sales area of ​​commercial housing is expected to further decline.
In terms of monetary policy, the CPI fell slightly in August, but this was mainly due to a significant drop in the carryover factor. In September, under the influence of holiday factors, food prices may continue to rise, and the government continues to emphasize the policy as the primary goal of inflation and stabilize inflation expectations. Therefore, monetary policy will remain tight in the second half of the year.
Second, the impact of financial market crash on the steel market From the perspective of the international market, the expected fall of QE3 helps the dollar rise in the short-term. At the same time, with the worsening European debt crisis, major advanced economies may gradually introduce easing policies to stimulate the economy. At present, the SNB intervenes in the foreign exchange market through unconventional measures. The probability of the Bank of England launching QE2 is gradually increasing, and the Bank of Japan may also intervene in the excessive appreciation of the yen in the future. Therefore, the dollar is expected to remain strong in the future. The upward movement of the U.S. dollar exchange rate will lead to the weakening of U.S.-denominated iron ore prices, which will in turn drive the domestic steel market to continue falling. It can also be seen from Figure 1 that there is a significant negative correlation between the exchange rate of the U.S. dollar and the price of imported ore, and the change in the price of imported ore lags behind the change in the U.S. dollar exchange rate. It is expected that the price of imported ore will continue to adjust downwards in the next period of time, when the steel price of the weak steel continues to rise. The price of imported ore is likely to be about 10-20 US dollars.
At the same time, the continued decline in the external financial market will also dampen the prices of domestic rebar futures, which will drive the spot market further down. As can be seen from Figure 2, since the beginning of September, the spread between rebar spot and futures has gradually widened, and has now reached a high of 435 yuan/ton. In the future, with the declining rebar futures, there is still room for further downside in the spot market.
First, the main reasons for the collapse of financial markets 1. The overall economic slowdown in Europe and the United States, the probability of the global economy "double bottom" increased since the second quarter of this year, Europe and the United States economy continued to slow down. U.S. non-agricultural employment in the United States in August showed zero growth, for the first time after World War II, the consumer and real estate markets continued to slump. Following the S&P downgrade of US sovereign debt, Moody’s lowered the bond ratings of the three major US banks (Bank of America, Citibank, and Wells Fargo) on the 21st. The fear of the U.S. economy returning to recession is gradually increasing. In Europe, the economic growth rate slowed down significantly in the second quarter. Leading indicators were low in innovation. In September, the euro zone's consolidated PMI fell below 50 (49.2) for the first time since August 2009. As the financial tightening of countries in the euro area increases, the economic growth of the countries in the euro zone will continue to slow.
2. The Fed launched a "reverse" operation with 400 billion yuan, and QE3 is expected to fail to take into account domestic inflationary pressures and debt problems. The Fed did not launch QE3 at the September interest-rate meeting, but adopted a "reverse" operation (according to the end of June 2012, purchases). The US$400 billion U.S. treasury bonds with a term of 6 to 30 years, while selling equal amounts of treasury bonds with a term of less than three years, stimulate the economy. This will help lower medium and long-term interest rates and boost real estate consumption and investment. But at the same time, it will push up short-term interest rates, which in turn will push the dollar higher in the short term and suppress the upward movement of commodity prices. Since the release of the Federal Reserve’s interest rate statement on the 21st, the US dollar index has rushed to 78.80 at the highest level, which has become an important reason for the sharp decline in financial markets in the last two days of the week.
3. The slowdown in the domestic economic growth and the easing of monetary policy in the short term, under the backdrop of macroeconomic policy tightening, continued slowdown in domestic economic growth. Although investment in fixed assets continued to grow steadily from January to August, investment in the railway transportation industry fell by 15% year-on-year. In terms of real estate, real estate development investment and newly started construction areas both declined in the month of August, indicating that the real estate investment in the later period may further slow down. At the same time, under the influence of stringent regulatory policies, housing prices in the first-tier cities began to gradually fall. In August, the price index of newly-built commercial housing increased significantly compared to the same period last year. In the later period, with the introduction of the second- and third-tier cities restrictions on purchase, the sales area of ​​commercial housing is expected to further decline.
In terms of monetary policy, the CPI fell slightly in August, but this was mainly due to a significant drop in the carryover factor. In September, under the influence of holiday factors, food prices may continue to rise, and the government continues to emphasize the policy as the primary goal of inflation and stabilize inflation expectations. Therefore, monetary policy will remain tight in the second half of the year.
Second, the impact of financial market crash on the steel market From the perspective of the international market, the expected fall of QE3 helps the dollar rise in the short-term. At the same time, with the worsening European debt crisis, major advanced economies may gradually introduce easing policies to stimulate the economy. At present, the SNB intervenes in the foreign exchange market through unconventional measures. The probability of the Bank of England launching QE2 is gradually increasing, and the Bank of Japan may also intervene in the excessive appreciation of the yen in the future. Therefore, the dollar is expected to remain strong in the future. The upward movement of the U.S. dollar exchange rate will lead to the weakening of U.S.-denominated iron ore prices, which will in turn drive the domestic steel market to continue falling. It can also be seen from Figure 1 that there is a significant negative correlation between the exchange rate of the U.S. dollar and the price of imported ore, and the change in the price of imported ore lags behind the change in the U.S. dollar exchange rate. It is expected that the price of imported ore will continue to adjust downwards in the next period of time, when the steel price of the weak steel continues to rise. The price of imported ore is likely to be about 10-20 US dollars.
At the same time, the continued decline in the external financial market will also dampen the prices of domestic rebar futures, which will drive the spot market further down. As can be seen from Figure 2, since the beginning of September, the spread between rebar spot and futures has gradually widened, and has now reached a high of 435 yuan/ton. In the future, with the declining rebar futures, there is still room for further downside in the spot market.
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