Morning Insight. x 123. Bullion

Transcription

1 Morning Insight September 12, 2018 x 123 FOR PRIVATE CIRCULATION ONLY KCSPL Research Morning Insight aims to give clients a brief price outlook and key Pivot levels on commodities before market opening. The report also includes key economic events scheduled for the day as well as a brief outlook on Indian currency. The detailed analysis on the commodity will be followed in our daily sectorial reports. Data and Events due today Date IST Currency Data Forecast Previous Importance 12-Sep 14:30 EUR Industrial Production m/m -0.50% -0.70% Low 17:30 INR CPI y/y 3.80% 4.20% Medium INR Industrial production 6.50% 7.00% Medium 18:00 USD PPI m/m 0.20% 0.00% Medium 19:00 USD Fed Bullard Speaks Medium 20:00 USD Crude Oil Inventories -1.6M -4.3M Medium 22:15 USD Fed Brainard Speaks Medium 23:30 USD Beige Book Low Indian rupee- Indian rupee has opened lower by 0.3% and hit a fresh record low level of against the US dollar. Rupee remains pressurized by higher crude oil price, general optimism about US economy, Fed rate hike view and contagion fear in emerging market economies. Brent crude trades above $79 per barrel amid bigger than expected decline in US crude stocks and storm concerns in the Atlantic. Trade related worries and contagion fear has continued to keep pressure on emerging market currencies and equity market. The sell-off in rupee has increased pressure on RBI to take stronger action to stem the currency's slide. Rupee may continue to remain under pressure unless we see stability in financial markets or some correction in crude oil price. USDINR may trade in a range of and bias may be on the upside. Bullion MCX Gold and Silver may note some decline tracking cues from international exchange. Domestic gold price will continue to be supported by weaker rupee hence one should wait for higher levels to create short positions. COMEX gold trades in a narrow range near $1195/oz amid lack of fresh cues. The US dollar index has also turned choppy amid mixed cues. Weighing on US dollar is optimism about Brexit deal which has propped up European currencies. However, supporting US dollar is optimism about US economy and safe haven buying amid trade worries and contagion fear in emerging markets. Trade worries persist as President Donald Trump said on Tuesday that the US was taking a very tough stance with China on trade however there has been no announcement on fresh tariffs. Trump claimed progress in talks with Canada but no deal reached yet. Also weighing on price is weaker investor interest. Gold holdings with SPDR ETF fell to tonnes, the lowest level since Feb Gold may continue to trade in a narrow range amid lack of fresh cues but sell on rise is suggested as optimism about US economy will underpin US dollar. COMEX Silver trades weaker near $14/oz amid rangebound movement in gold and mixed trade in industrial metals. Silver has tested the lowest level since Jan.2016 amid concurrent losses in gold and industrial metals. With persisting trade worries and upbeat outlook for US dollar, weakness in commodities at large will continue. Silver s continual fall has also pushed gold silver ratio to multiyear high and stood at 84.7 yesterday. ETF inflows however show buying interest in silver. Silver holdings with ishares ETF were unchanged yesterday at tonnes after inflows earlier in the week. Morning Insight Please See Disclaimer on the Last Page 1

2 Focus today will be on US economic data and Fed comments which will affect US dollar. Risk sentiment will be affected by trade related development and trend in emerging market economies. Kindly refer to Pivot table for support and resistance levels for Bullion contracts Base Metals Most Base metals on LME trade higher today after ending on a lower note yesterday. LME Lead continued to be the worst hit with prices falling by another3.1% following 2.4% slide on Monday. In other metals, Zinc and Aluminium closed 2.9% and 2.4% lower respectively while Nickel and Copper ended 1.45% and 0.9% lower respectively. Most base metals trade higher in early trades today as prices take breather following yesterday s selloff. Also supporting prices is modest retreat in US Dollar today and falling stocks of most metals at both LME and SHFE warehouses. The gains may however be capped amid demand worries tracking escalating trade war between US-China and its impact on global health. Also putting pressure is weakness in equity market and general uptrend in US Dollar. Asian equity markets trade with a weaker bias in early trades today despite US markets ending 0.4% higher yesterday. Weighing on indices is lingering trade war worries especially between US-China along with fears of contagion of turmoil in emerging markets. There has been no new development on trade front after Trump s last week threat of imposing tariff on virtually all of Chinese imports to US and China's foreign ministry warning on Monday that the nation will retaliate if US takes any new steps on trade. Meanwhile US Dollar Index trades modestly lower today following positive close yesterday. The currency continues to remain supported by safe haven demand, general optimism over US economy and expectation of two more rate hike by US Fed this year. The upside may also be capped amid growth worries in top consumer China tracking recent spate of weak data and ongoing trade war with US. Focus will now shift to China s industrial production, retail sales and fixed investment data due on Friday. Meanwhile on fundamental front metals like Aluminium and steel making commodities like - Zinc and Nickel may come under pressure following reports from Reuters that China was considering allowing its northern provinces to determine their own restrictions on industrial output this winter. Aluminium, for which northern China is a major producing area, has come under pressure amid expectations that provincial curbs could remove less supply than the 30% cuts stipulated in a draft central government document released last month. Steel prices in China too have declined by nearly 5% in past two sessions following the news dragging stainless steel making ingredient, Nickel and steel galvanizing material, Zinc with it. The metals pack may note some gains amid breather rally the uptrend may however fail to sustain tracking bleak macro factors. Focus today will be on US data along with comments from Fed officials and its impact on US Dollar. Also focus will be on development related to US trade policies related to China and Canada its impact on general sentiment. Kindly refer Pivot table below for daily support resistance of MCX Base metals contracts. Morning Insight Please See Disclaimer on the Last Page 2

3 Energy Crude Oil- MCX Crude may note some gains tracking cues from international exchange. NYMEX crude trades higher near $70 per barrel after a 2.5% gain in previous session. Supporting crude price is API weekly report which noted a sharp 8.64 million barrels decline in US crude oil stocks. API however noted a bigger than expected rise in gasoline and distillate stocks. Storm activity in Atlantic has also resulted in some risk premium. Hurricane Florence is moving towards the US East Coast while a weather pattern is developing near the Gulf of Mexico. Florence is not expected to hurt refineries or production however storm activity could cause fuel shortages. Meanwhile, storm activity in Gulf of Mexico could result in some production outages if it strengthens. Reports that gunmen shot and killed two people at Libya s National Oil Corp. headquarters added to supply concerns. Also supporting crude are supply concerns relating to Iran as buyers have started reducing purchases in face of US economic sanctions. Meanwhile, EIA in its monthly report, lowered forecast for US crude production. However, weighing on price is higher OPEC, Russia and US crude production and demand concerns amid trade war worries and contagion fear in emerging market economies. Crude may continue to trade higher ahead of inventory report. EIA is expected to note a 1.6 million barrels decline in US crude oil. Focus will be on US crude production. Also in focus will be OPEC s monthly outlook and US economic data. Support for MCX Crude September contract is seen at Rs.5000 while Resistance is seen at Rs Natural Gas- MCX Natural gas may note some gains tracking cues from international exchange. NYMEX natural gas trades higher after yesterday s 0.9% gain. Supporting gas price is forecast of hot weather in parts of US which will keep cooling demand high. Also supporting price is expectations of a smaller than average decline in gas stocks. Narrowing gap between gas and coal price will also increase demand for power sector. Rising European gas price has also increased export demand for US gas. EIA in its month report raised demand forecast and lowered production estimate for Storm activity in Atlantic has also resulted in some risk premium. Hurricane Florence is moving towards the US East Coast while a weather pattern is developing near the Gulf of Mexico. Natural gas may trade with a positive bias ahead of inventory report and as market players assess storm situation but we do not see a sustained rise. Support for MCX Natural gas September contract is seen at Rs while Resistance is seen at Rs.208. Edible Oil complex Palm Oil: BMD Palm oil market was closed for two days and resumed its trading this morning on Wednesday. The third month contract is seen trading at 2260 down by 0.22% from the previous close price. Market is seen steady despite the CBOT Soy oil was down last evening in the US. We think the traders are awaiting the MPOB data which is rescheduled today at 10 AM IST. We think the expectations are set onto higher supply- higher production and higher ending stocks. However, any major deviation in the price will have its impact on the price. The exports figure will also be important to watch out for. According to cargo surveyor Inter, Malaysia s September 1-10 palm oil exports rose 63.0 percent to 489,492 tons compared to 300,326 tons in corresponding period last month. Top buyers were European Union 180,167 tons (73,031 tons), India & subcontinent 69,395 tons (66,100 tons) and China at 49,200 tons (16,700 tons). Values in brackets are figures of corresponding period last month. If the exports increases substantially then the market might not see major decline in the price. The details of the report shall be facilitated upon release. Coming to Indian market, the September future ended the session on Tuesday at Rs no change from previous close. Interestingly the trading volumes were also very negligible. In the absence of BMD market the MCX palm oil was steady. We think market could see good volatile session today. The trading range for the day would be Rs. 600 to Rs and recommend selling with strict stop loss above Rs Mustard Seed: Mustard seed price was steady on Tuesday s trading session with marginal negative bias. The active October future ended the session at Rs down by Rs. 3 but it had made an intraday low price of Rs per quintal. As per market news, NAFED Continued to struggle in selling the stocks that they hold. On 5th Sep only 2560 tons of Morning Insight Please See Disclaimer on the Last Page 3

4 mustard was auctioned in the price range Rs to 3998 per quintal. At the end of the day NAFED holds 8.67 lakh tons of stocks in their warehouses. Overall we expect market to remain sideways and more selling would be witness only if huge selling takes place in the market. On the technical side, the market for October future is expected to trade in the range of Rs to Rs. 4245, inside range. Further on the market, there are reports circulating that Centre may allot INR 10 billion for covering the difference between the market price and MSP of all oilseeds. This is yet to get confirmed but is indicating towards huge subsidy coming into primary sector. As there are quite definite chance that the prices will rule below MSP the announcement can come before the harvest starts. NAFED has to play a significant role in procuring the oilseeds and also tackle the storage issues. Stockiest role will be limited and prices will be a function of the pace by which the stock is released in the market. As the market moves into lean season any delay in selling of stock has the potential to create severe shortage in the market. Soy Oil: Ahead of USDA data, CBOT soy oil active December contract price declined by 26 points or 1% on Tuesday to settle at cents/pound. Price decreased against contract high aggregated open interest since August and decent volume, which signals at short accumulation. Today again, price have opened at the lowest level since contract inception at and is expected to fall below 28 mark by the end of sessions on apprehension of better than forecasted production numbers. Besides, after two consecutive holidays, CPO, a close substitute of soy oil, has also opened weak today on BMD amid reports of huge stock pile ups in Malaysia. Tracking cues from international markets, Soy oil prices have corrected in both spot as well as future market. However, good demand in physical markets due to festive season has minimized the impact of slump in global prices and arrested the down fall to some extent. Soy oil spot price at Benchmark Indore market marginally declined by 0.2% and reached Rs /10 kg. Similarly, soy oil October future price on NCDEX also fell by 0.2% to settle at Rs /10 kg yesterday. An increase was seen in Argentina export price as their govt. is moving ahead with plans to levy more duty on soy oil & soya meal exports. As on September 11th, Soy oil October future price was trading at premium of only 2 points compared to Import cost from Argentina which stood at Rs.744/kg. Limited supply of soybean and good demand during festive season will support soy oil prices for near terms. Besides, increase in import price from Argentina will also keep the overall sentiment bullish in soy oil. Soybean: Despite reports of better than last year crop condition in U.S., CBOT Soybean active November contract price fell by 14 points or 1.7% to settled at $ cents/bushel. Price corrected against higher aggregated open interest and good volumes which hints at short accumulation. Ahead of data release by USDA, analysts have pegged U.S. soybean output estimate to cross 121 million tone mark in September report. Though China has resorted to Brazilian soybean crop to cater its huge demand for beans, diminishing stocks with Brazil will compel to China to source some of its requirement from U.S. even at 25% import duty. As our expectation, with disregard to correction in international markets, Soyabean active October future price on NCDEX surged by 26 points or 0.8% and settled at Rs.3,262/quintal yesterday amid falling supply and good demand from Morning Insight Please See Disclaimer on the Last Page 4

5 crushing units. While, Soybean prices at Benchmark Indore market marginally corrected by 3 points and reached at Rs.3,442/quintal yesterday. Though soyabean sowing has not increased as per expected growth rate of 10-15% higher from previous year, with no signs of crop damage and adequate rainfall, soyabean crop yield is expected to rise significantly this season, which will keep overall output by at least 10-12% higher than last year s output of 109 lakh MT. Till September 7th, Soyabean acreage across the country was reported at lakh Hectares, which is 6.3% higher than same period last year. Acreage in largest soyabean producing state, Madhya Pradesh has crossed 53 lakh Ha, compared to 50 lakh Ha last year. We expect soyabean price to trade marginally lower for coming days as prospects of higher production in U.S. and new crop arrivals in coming weeks will keep soybean prices under pressure. Cotton December future ICE cotton ended at 8289, down 96 points. It had a 186 point gain previous day. Market traded down amid trade war worries between US and China continued while currencies are troubling a lot in the market. Broadly commodities ended lower while US equity markets were positive. Also market has failed to break cents key resistance level hence it continued to trade in the four week s sideways range. We strongly think unless the range of and are cleared either side it may have another such week where cotton price may remain sideways. On the trading front the volumes were slightly thin. The aggregate volumes were around 20K contracts and the open interests maintained near 255K contracts. Traders are largely quiet ahead of Wednesday s USDA_WASDE report releasing at 9 pm IST. From the other side of the world, China s ZCE futures had a 2nd session with very small gains. The ZCE has also traded sideways for about 4 weeks. Chinese State Reserve cotton on Tuesday s auction had a turnover rate of percent, spinners only. Offered were 30, tons (137,792 bales); and sold were 25, tons (117,777 bales). The cumulative turnover rate is percent (offered versus sold). This auction series started at 24.1 million bales and million bales remain. Coming to domestic market the spot price was mostly calm last week however; s-6 price for the old crop has increased marginally to Rs. 47,650 per candy ex-gin which translates to cents per pound given the exchange rate. Likewise, rates for Punjab J-34 have also moved higher to an average of Rs. 4,765 per maund (80.05 cents per lb). New crop J-34 is quoted at Rs. 4,690 (78.80 cents/lb) for delivery by September 20 and at Rs. 4,720 (79.30 cents/lb) for an end of September delivery. The discount applied to the earliest available supplies is attributed to increased moisture and lower quality parameters in the first arrivals of the season. The MCX cotton future for October contract has ended the session at Rs down by Rs. 140 from the previous close. It was a volatile day for cotton as it moved in the range of Rs to Rs per bale. Morning Insight Please See Disclaimer on the Last Page 5

6 Energy Industrial Metals Precious Metals This morning ICE cotton is seen trading steady, ZCE futures are quiet but the domestic currency has further depreciated to PIVOT ANALYSIS FOR MAJOR COMMODITIES trade near record low price of per one US dollar. We think Indian cotton future might trade sideways today. The COMMODITY S4 S3 S2 S1 PP R1 R2 R3 R4 trading range would be Rs to Rs per bale. Spot Gold MCX Gold Oct MCX Gold Dec MCX Gold Mini Oct MCX Gold Mini Nov Spot Silver MCX Silver Dec MCX Silver Mar MCX Silver Mini Nov MCX Silver Mini Feb LME Copper MCX Copper Nov MCX Copper Feb LME Zinc MCX Zinc Sep MCX Zinc Oct LME Nickel MCX Nickel Sep MCX Nickel Oct LME Aluminum MCX Aluminium Sep MCX Aluminium Oct LME Lead MCX Lead Sep MCX Lead Oct MCX Brass Sep MCX Brass Oct NYMEX Crude MCX Crude Oil Sep MCX Crude Oil Oct NYMEX Natural Gas MCX Natural Gas Sep MCX Natural Gas Oct Morning Insight Please See Disclaimer on the Last Page 6

7 Spices Guar Pulses & Grains Cotton Oilseeds Complex PIVOT ANALYSIS FOR MAJOR COMMODITIES COMMODITY S4 S3 S2 S1 PP R1 R2 R3 R4 CBOT Soybean NCDEX Soybean Oct NCDEX Soybean Nov NCDEX Mustard Sep NCDEX Mustard Oct CBOT Soy oil NCDEX Ref-Soyoil Sep NCDEX Ref-Soyoil Oct BMD CPO 3rd Month MCX CPO Sep MCX CPO Oct NCDEX Castor Seed Sep NCDEX Castor Seed Oct ICE Cotton Dec MCX Cotton Oct MCX Cotton Nov NCDEX Kapas Apr NCDEX CS Oilcake Sep NCDEX CS Oilcake Dec NCDEX Chana Sep NCDEX Chana Oct NCDEX Delhi Wheat Sep NCDEX Kota Wheat Oct NCDEX Maize Rabi Sep NCDEX Maize Kharif Oct NCDEX Guar Seed Oct NCDEX Guar Seed Nov NCDEX Guar Gum 5 Oct NCDEX Guar Gum 5 Nov NCDEX Jeera Sep NCDEX Jeera Oct NCDEX Dhaniya Sep NCDEX Dhaniya Oct NCDEX Pepper Sep NCDEX Pepper Oct NCDEX Turmeric Sep NCDEX Turmeric Oct MCX Cardamom Sep MCX Cardamom Oct MCX Mentha Oil Sep MCX Mentha Oil Oct Morning Insight Please See Disclaimer on the Last Page 7

8 Aurobinda Gayan- Vice President Research Fundamental Team Madhavi Mehta- AVP Bullion; Energy Priyanka Jhaveri- AVP Base Metals Mohit Vyas- Senior Manager Agriculture Technical Team Ashok Kamrani- Senior Manager Anup Sahu- Manager Disclaimer This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient and we are not soliciting any action based upon it. This report is not to be construed as an offer to seller or solicitation of an offer to buy any commodity or commodity derivative to any person in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Commodity Services Private Limited. It doesn't constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither Kotak Commodity Services Private Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the commodity referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions including those involving commodity derivatives involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a commodity's price movement and trading volume as opposed to focusing on a commodity's fundamentals and as such may not match with a report on a commodity's fundamentals. We do not have any information other than information available to general public. The report is based on information from sources like respective industry associations, FICCI, CII, companies, media and other public sources. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading may make trading decisions that are inconsistent with the recommendations expressed herein. We and our affiliates, officers, directors, and employees worldwide may: (a) from time to time, have long or short positions in, and buy or sell the commodities mentioned herein or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodity/ (ies) discussed herein or have other potential conflict of interest with respect to any recommendation and related information and opinions. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject commodity and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Kotak Commodity Services Private Limited's prior written consent. Registered Office: Kotak Commodity Services Private Ltd., Nirlon house, 1st Floor, Dr. Annie Besant Road, Opp. Sasmira, Near Old Passport Office, Worli, Mumbai CIN No. U65910MH1987PTC Fax: Customer care no Website: SEBI registration no.: INZ NCDEX/TCM/CORP/0479. MCX/TCM/CORP/0026. NCDEX MCX Trading in commodities is subject to market risk and one should read the Risk Disclosure Document carefully prior to trading Morning Insight Please See Disclaimer on the Last Page 8