Recently, the performance of domestic and foreign cotton markets is volatile, and the release of a news can cause large fluctuations in the market. There is no rule at all. Perhaps this is the path of the cotton market under the blessing of funds. So, what was the reason for Zheng Mian's slump on May 6?
This is closely related to the decline in US cotton yesterday, which in turn is closely related to the overall financial environment in the United States. On May 5, the U.S. stock market experienced a night of "blood and rain". The three major indexes collectively opened lower. At the close, the Dow plunged 1,063 points, or 3.12%. The last time the Dow plunged more than 1,000 points was nearly 2%. things a few years ago. The recent release of U.S. employment, economic, financial and other policies or data is worrying, causing the stock index to plummet. In particular, Federal Reserve Chairman Powell said on Wednesday that a 75-basis-point rate hike was not worth considering, but then U.S. interest rate futures prices on Thursday showed that the possibility of the Fed raising interest rates by 75 basis points in June was 75%, which directly led to market sentiment. Extremely pessimistic, the US cotton ICE has a limit down. Therefore, the core indicator affecting the market is still the Fed's policy of raising interest rates and shrinking its balance sheet. This indicator is the largest gray rhino in the market. It is still too early to lead to the predicted economic recession or economic crisis. After all, the Federal Reserve hopes that the US economy will achieve a soft landing.
The domestic Zheng cotton rally shows fatigue. On the one hand, it is the rising futures price, and on the other hand, it is the textile enterprise that continues to reduce production. There is a serious contradiction in the fundamentals. Under the weight of contradictions, Zheng Cotton can still break through the previous high, which is completely related to the trend of US cotton. The demand for US cotton is good, and the abundant orders from the foreign textile industry have formed a support for cotton prices. On the other hand, domestic textile and apparel orders continue to be lost abroad. Due to the control of the epidemic, the number of domestic orders is also very limited, the operating rate of enterprises remains low, and coupled with high cotton prices, the production of enterprises is at a loss, and their own production enthusiasm is not high. The tension between reduced demand and Khmer prices continues to intensify.
Does the Fed's rate hike mean commodities have peaked? The Fed raising interest rates and shrinking its balance sheet will definitely have a certain inhibitory effect on inflation, but the degree of effect needs to be observed. After all, other factors affect inflation. It is now widely believed that the Fed raising interest rates is likely to lead to economic stagflation or recession. Whether this is the case requires later verification. If this round of interest rate hikes plays a good role in curbing inflation, the decline in commodity prices will have little impact on the economy. On the contrary, if the pace and rhythm of interest rate hikes affect economic development, it will also be bad for commodities. Therefore, in the context of interest rate hikes, the downward momentum of commodity prices at historically high levels is significantly stronger than upward.
In reality, the spot price of cotton is very strong, and cotton is also a seasonal crop. It is unrealistic to immediately go down the road of falling interest rates as soon as the interest rate starts to rise. It takes time for the cotton market to turn bulls and bears, and it also requires the macroeconomic environment and the Fundamental Resonance Mates.
Source: International Business Daily, Dazhou Foreign Trade Information, Chemical Fiber State, Cotton Net Textile Platform, Internet