Quotation Today: A Comprehensive Inventory Of The Impact Of The Tariff Storm On The Market

Comprehensive inventory of the impact of tariff storm on the market

Macroscopic: The higher than expected equivalent tariffs are mainly reflected in the following four points:

1) 10% baseline tariff for all trading partners, effective on April 5;

2) Individual tariffs ranging from 24% to 49% will be levied on 21 major counterparties;

3) Cancellation of small package tariff exemption below 800 dollars;

4) An additional 25% tariff will be levied on imported automobiles.

Inventory:

Between China and the United States, an additional 34% tariff has been levied, which has accumulated 54% this year. The weighted tariff of the United States on China is 66%. China has imposed an additional 34% tariff on the United States since April 10. After the first round of trade conflict, China's export share to the United States dropped from 17% to 14.7%.

The United States is at risk of stagflation. The expectation of the Federal Reserve to cut interest rates rose to four times, and the expectation of the European Central Bank to cut interest rates also increased from two times to three times. Under the circumstance that domestic and foreign demand is affected, it may also promote the reduction of reserve ratio and interest rate.

In recession trading, gold and US debt may be stronger. There is a probability that the US dollar will weaken, and the US stock market may not end its adjustment. The focus of domestic development is on internal circulation. The consumption sector of domestic stock market may be stronger, and the bond market may be stronger in the second quarter under external shocks.

Impact of major categories of assets:

Colored:

Precious metals/nonferrous metals declined during the Qingming Festival; Silver/copper may open lower.

Precious metals are still viewed as a core and three drivers:

Core: the uncertainty of Trump's government policies

Drive:

1/The stagflation expectation is stronger, moving from a soft landing to stagflation, which is very beneficial for gold.

2/The credit system of the US dollar is damaged, and the wave of de dollarization and anti globalization may accelerate the replacement of the US dollar and seek for the replacement of the US dollar. The purchase of gold by central banks in emerging markets accelerated, with more than 1000 tons of gold held in three years, and domestic central banks increased their holdings simultaneously.

3/The geopolitical risks did not ease as scheduled, the promises made during the general election went bankrupt, and Israel tore up the ceasefire agreement.

Risk: Tariff landing reduces uncertainty; Geo risk mitigation; Capital flows back to the US dollar to suppress gold; Emotional overheating

Gold; Pay attention to whether the lost ground can be recovered quickly after the low opening, otherwise it may fall below 3000 and continue to seek the bottom.

Silver: Look more at it as an industrial metal, and the decline may be greater than that of gold. Later, consider that gold and silver pay more attention to the opportunity of low position layout than gold.

Copper: Benefiting from tariff expectations, copper trade flows changed and copper prices rose.

After the announcement of the temporary exemption of tariffs, copper prices may fall, and copper in the US market will be sufficient in the medium term. The foundation of further weakening is uncertainty risk and liquidity panic.

However, the fundamentals are not bad. In peak season and stock replenishment expectation, copper mine is tight, and it may be an opportunity to focus on the trend of LME and the US market after the limit decline is opened.

Aluminum: The trend itself is weak after the year, and the decline may be small. Look for a rebound opportunity below 20000.

Zinc: This year's weak varieties of nonferrous metals may be differentiated, with strong spot and weak futures.

Tin: There is still a chance for DRC to strengthen its supply.

Lithium carbonate/industrial silicon: close to the industry's cost line range, with little downward space.

Crude oil:

1. Tariff, pay attention to the risks brought by other countries' countermeasures

China's imports from the United States are not high, and alternatives can be found, which will only increase import friction and security concerns

For the United States, heavy oil imported from Canada may seek alternatives from the Middle East, and refineries may be out of stock for a short time; Importers from Mexico may seek alternatives from Brazil, and the cost will shift upward to China. Refineries need to adjust raw materials.

2. OPEC increase production

In May, an additional 411000 barrels of crude oil were put into production, which was three times the expected increase in production (Saudi Arabia forced oil producing countries to reduce production by pressing oil prices), and the situation of excess supply and demand in the crude oil market intensified.

Oil distribution fell by more than $11, more than 10%, and crude oil will probably open at a limit rate tomorrow.

As a risk asset, crude oil will be priced at risk, which is difficult to stop falling in a short time.

However, EIA inventory remains low. Once the price falls, the cost support is relatively strong.

Follow up attention:

1) US shale oil production cost, 50-55 dollars/barrel.

2) The marginal influence of OPEC is expressed at the monthly meeting.

Freight collection index:

In 2018-19, the policy was boosted by short-term strong exports, and the growth rate of trade in 19 years gradually fell back.

This year's rush shipment time window is relatively limited, and the negative impact on demand may be relatively timely. Goods may be returned, and the US line trade volume may shrink (previously accounting for 20% of the global trade volume)

It is estimated that the demand between China and the United States will be reduced by 10% - 20%, which may increase the European line transport capacity and suppress the panel.

Short term transactions are chaotic. The peak season has not yet arrived in June, but it is still weak in recent months. The subsequent peak season expectations may still be deduced in August, but the peak season height may be limited. The medium and long-term transport capacity is surplus.

Fuel oil/asphalt:

In the early stage, the price of crude oil moved upward, but there was no obvious support for supply and demand. Next week, it is possible to follow the oil price down.

The support of low sulfur fundamentals is weaker than that of high sulfur.

The recovery of asphalt demand is poor, and the decline may also be large.

Black:

This time, there was no direct impact on steel products, but the 25% steel tariff had taken effect before that. Mainly focus on 15 million tons of indirect exports.

China's imports of coking coal from the United States showed an increasing trend, accounting for 8.7% of imports. In January and February this year, imports accounted for 14%.

Once the 34% tariff is imposed, the import of coking coal may be affected and the pressure on the supply of coking coal may be eased.

Tomorrow's opening decline may not be as big as that of nonferrous metals/energy and chemical industry, and coking coal may be relatively resistant to decline. Pay attention to production reduction expectations.

agriculture products:

Soybean meal:

After the increase of customs duties and taxes in the United States, the absolute price of soybeans will decline, the proportion of cost increase may not be too high, the cost support for the far month will be stronger, and the recent month may not be significantly higher. (Reason: China is more dependent on Brazil at present; it is still the import period of Brazil beans)

Grease:

The collapse of crude oil may affect the consumption of oil and grease for firewood. The MPOB report next week is expected to be weak, and the oil and grease will be treated weakly.

Corn/pig/egg has little impact

Cotton:

The domestic annual output is 6 million tons, the consumption is 7 million to 8 million tons, and the annual import is 1 million to 2 million tons. The proportion of American cotton imports is very large, about 45%. However, the proportion has been reduced to 20% in the second half of last year, and the tariff has little impact on the supply chain.

More attention to China's textile and clothing layout in Southeast Asia may be hit, and there may be a game between long and short.