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On August 31, China's official manufacturing PMI for August was 49.1, expected to be 49.5 and the previous value was 49.4. The PMI data was lower than market expectations, and the manufacturing industry's business climate continued to shrink. Commodity futures generally fell in early trading, with the black series leading the decline.
Comments:
The PMI data in August was lower than market expectations, and the manufacturing industry continued to shrink. The price sub-indicators showed signs of fatigue, but low prices failed to stimulate the recovery of demand. The new order index fell further, and enterprises began to accumulate inventory again, and the production momentum dropped sharply. The production index fell from 50.1 in July to 49.8 in August, falling into the contraction range, ending the expansion trend since the second half of last year. The expectations of corporate production and operation activities have obviously weakened, and the operation of small and medium-sized enterprises has become more difficult and the confidence has continued to be sluggish. However, the external demand is slightly better than the domestic demand. The new export order index has rebounded for two consecutive months. In addition, the month-on-month drop in the purchase price of major raw materials, especially the larger drop relative to the ex-factory price, has brought about a bottoming-out rebound in production profits.
The PMI that is lower than expected may end this wave of oversold rebound of commodities. As I have always emphasized, the recent overall rise of commodities should be treated as an oversold rebound. The price shock repair, different varieties are derived from their own supply and demand fundamentals, and interpret the differentiated structural market. Last Friday's mortgage essay stimulated the long-awaited surge in A-shares, but the latest August PMI over the weekend poured cold water on the domestic capital market, and the commodity index almost fell back to the starting point of this round of rebound in one day. At present, it is still the same as above.
In 2024, commodities have gone from reflation trading to Trump trading to recession trading, and are now in a shock recovery market of oversold rebound. This year's market can be roughly divided into three sections: from the beginning of the year to the end of May, commodities rose overall under the dominance of reflation trading logic; from June to August 15, reflation trading switched to Trump trading and then to recession trading, and commodities peaked and fell sharply. Since August 15, recession trading has cooled down, new macro logic is still brewing, and commodities have rebounded.
In addition to the weak reality reflected by the domestic PMI data being lower than expected, the style switch performed by overseas US stocks last week also implies investors' concerns about the economic outlook. Although the US GDP data in the second quarter exceeded market expectations, personal consumption expenditures remained strong, and the world-renowned Nvidia's second-quarter performance was outstanding, it closed sharply lower because it was lower than the market's most optimistic expectations. Since Powell officially announced that he would start to cut interest rates at the Jack Hall Global Central Bank Annual Meeting, the market has become more "panicky" about US data, so the US dollar index appears to be abnormally weak, Bitcoin, which is the most sensitive to liquidity, and US technology stocks with high stock indexes all seem to be in a high position, which then brings about a style switch in the US stock market, and also represents the quiet change of global macro funds.
For commodities, after returning to the starting point of the rebound, it is still meaningful to review the original thinking about the "oversold rebound" of commodities. Since June, commodities have ended their year-to-date gains and have fallen rapidly. This is due to the collapse of optimistic expectations for global economic recovery. The macro logic has quickly switched from "reflation trading" to "Trump trading" and then to "recession trading". After more than two months of decline, the commodity index has fallen by more than 10%, and a lot of panic has been priced in. The inflation expectation indicator implied by US bonds has even fallen to around 2%. Many commodities have fallen below the low point in the middle of last year, and some varieties have even hit a new low in recent years. Overall, commodities have returned to a very supportive position. Now, with the temporary fading of concerns about the US economic recession, there are signs of restarting domestic policy expectations, and commodities are expected to stabilize and rebound. However, it should be noted that under the background of geopolitical conflicts and the still turbulent political and economic landscape, the road to global economic recovery is full of thorns, and commodities are unlikely to rise at a large level this year. It is more likely that commodities will show a shock recovery as a whole, and different varieties will show differentiated structural trends due to their own supply and demand fundamentals. In the future, we need to focus on whether the "recession trade" will reappear overseas, and whether the "exceeding expectations" policies will be introduced and traded domestically.
The article is forwarded from: Jinshi Data
