International oil prices fell sharply on Wednesday on fears of a second overseas outbreak. NYMEX WTI crude settled at $40.03 a barrel, down 4 per cent, while Brent Crude closed at $41.73 a barrel, down 3.31 per cent.

On Wednesday, LME copper for three-month delivery briefly broke through the $7,000 a tonne mark, hitting a peak of $7,034, its highest level since June 2018. The impact of the appreciation of the Renminbi, the recent Shanghai copper rose significantly less than LME copper. Chile's Candelaria copper mine suspended operations from Tuesday after two of its unions went on strike. Monday, a worker at Codelco, a Chilean state owned company, took to the streets to protest against job cuts announced during the outbreak.

On October 21st the onshore Renminbi rose above 6.65 to the dollar, while the offshore Renminbi briefly rose above 6.63 to more than 300 BP a day, setting new highs since July 2018.

International oil prices fell sharply

International oil prices fell sharply on Wednesday on fears of a second overseas outbreak. NYMEX WTI crude settled at $40.03 a barrel, down 4 per cent, while Brent Crude closed at $41.73 a barrel, down 3.31 per cent.

Regarding the crude oil market trend, the East China Sea Futures Institute Senior Energy analyst Li wanying believed that the current disk is still waiting for direction selection signal.

According to the 23rd meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC and its production reduction allies held on October 19, the overall production reduction implementation rate of OPEC and its production reduction allies reached 102% in September 2020, this is the highest level since May 2020(excluding the voluntary excess cuts made by Saudi Arabia, Kuwait and the United Arab Emirates in June 2020) .

Under such circumstances, she believes that it is not very likely that OPEC will completely change its mind on reducing production in the fourth quarter. However, on the premise that overall demand will shrink, whether some countries with high financial dependence on crude oil export will be able to fulfill the contract in the future is in doubt.

In fact, the recent spread of the epidemic in the US and Europe, many countries have introduced more severe social closure measures, such as curfews, under such circumstances, the CFTC position reflects the long capital is more cautious.

Under the background of post-epidemic, it may take more time for the structure of crude oil price difference to be repaired to the backwading structure. On the supply and demand level, consumption of refined oil is still not optimistic, cracking price difference remains low operation. In the US, the number of wells drilled at Baker Hughes has risen in recent weeks, reflecting the fact that oil prices now cover some of the production costs of drilling in permian producing areas. In this case, Li wanying said, for the fourth quarter oil prices remain neutral judgment.

She suggested that more attention needed to be paid to changes in the macro environment for some time to come. For example, Donald Trump and Biden's differing views on energy and the environment could affect oil supplies ahead of the US election in early November. In addition, the epidemic, vaccines, brexit and other factors or on the price of oil caused a certain degree of disturbance.

In fact, in her view, the fourth quarter macro events more, but in the absence of great good news, the oil price is afraid of a breakthrough, the probability of maintaining wide swings.

Against the backdrop of global liquidity easing, copper prices are expected to continue to rise.

Referring to the recent rise in copper prices at home and abroad, in the Milky Way Futures Commodities Ministry non-ferrous researcher Wang Yingying, mainly by the unprecedented impact of this year's global central bank discharge.

"The combination of a robust global economic recovery against the backdrop of global liquidity easing has provided a relatively good upside for copper prices, " explained Wang Zhijian, a metals analyst at Nanhua futures.

It is understood that at present the global dominant inventory of fine copper is at an all-time low, and the global supply of copper concentrate remains tight in the near future, the ongoing protests by copper miners in Chile could, in serious cases, lead to a mass strike that could exacerbate supply tensions. On the demand side, grid investment and consumption of automobiles and household appliances are expected to maintain high growth rates. In this case, Wang Yingying said, in the recent strong appreciation of the Renminbi, although the overall probability of copper in Shanghai than LME copper, but may still oscillation strong.

Wang still agrees. In his view, the next period of time, in tight supply, robust recovery in demand, Shanghai copper is likely to maintain the upward trend. In particular, the late U. S. is about to launch a new stimulus package, liquidity easing is expected to continue. In addition, China's economy is recovering rapidly after the outbreak, and the new domestic crown vaccine is now entering the vaccination phase, which is for the later stage of the economy to continue a smooth recovery is a good guarantee.

However, he acknowledged that there are still some risk points in the copper market for some time to come, particularly the US election and the second outbreak of the new crown disease, which will have an impact on copper prices.

Both the onshore and offshore Renminbi have hit new highs in more than two years.

On October 21st the onshore Renminbi rose above 6.65 to the dollar, while the offshore Renminbi briefly rose above 6.63 to more than 300 BP a day, setting new highs since July 2018.

Ma Yan, a macro foreign exchange analyst at Nanhua Futures, said the rise in the Renminbi's exchange rate was mainly influenced by the progress of the US fiscal stimulus talks, the global leadership in the prevention and control of China's epidemic and the relative easing of sino-us relations.

It is understood that risk appetite has improved in the recent context of progress in the US fiscal stimulus negotiations and renewed market hopes for follow-on negotiations and a pre-election agreement, the combination of hawkish signals from the European Central Bank led the dollar index to weaken near 93.10. In addition, China leads the world in epidemic prevention and control. At a time when overseas economic growth is still sluggish, China's GDP growth has recovered to 4.9% in the third quarter, and the economic structure has improved markedly from the second quarter. Moreover, the current epidemic situation in Europe continues to worsen, and the epidemic situation in the United States has also shown signs of a third rise, china's economic growth rate advantage continues to exist, the margin growth rate difference is expected to widen. "All of this has created a strong support for the renminbi, " Ma said.

In addition, she believes that the recent relative detente between China and the United States has also contributed to the sharp appreciation of the Renminbi. After all, the Renminbi is more influenced by the domestic economy and the dollar index, and if the domestic economy and the dollar index are in resonance with the easing of friction between China and the United States, it will lead to a sharp appreciation of the renminbi.

However, in view of recent uncertainties, Ma believes that although the overall strength of the RMB exchange rate, but the future probability will not continue to rise significantly.

She said there was considerable uncertainty about the outcome of the US election and that the benefits of the US fiscal stimulus bill negotiations had been reflected in the market ahead of time. In that case, the dollar index could rebound if the outcome of the stimulus talks does not live up to market expectations. At the same time, given the relative economic recovery in Europe and the United States, does not support the euro's continued strength, the decline in the dollar index short-term does not have fundamental support. In addition, the purpose of the Central Bank's recent cut in the foreign exchange risk reserve ratio is to stabilize the RMB exchange rate and guide the two-way fluctuation of the exchange rate. If the RMB exchange rate shows obvious herding effect and pro-cyclical behavior, it can not be ruled out that the Central Bank can guide short-term exchange rate expectations by suspending counter-cyclical factors.

In this context, Ma suggested that foreign exchange investors should focus on the US election, the US fiscal stimulus bill, brexit talks, developments in the US and Europe, and progress in vaccine development.

The US election, in her view, is still a big uncertainty, or even entirely possible contrary to expectations or opinion polls election results. After all, recent polling data show a further narrowing of his campaign advantage over Donald Trump. Ma told reporters that such uncertainty will exacerbate the volatility of risk appetite in the short term, leading to sharp fluctuations in global financial markets, and may affect the US economy and monetary policy in the long term.

As for the U. S. fiscal stimulus bill, she said, is a short-term risk point, mainly affect the U. S. economic expectations and inflation expectations. At the same time, the progress of the negotiations on the stimulus bill will also lead to increased volatility of risk appetite, which in turn will affect the movement of the RMB exchange rate.

A-SHARE short-term wait-and-see

On October 21, the a-share market continued to oscillate downward. By the close, the Shanghai Composite Index was down 0.09 per cent at 3,325.02, the Shenzhen Composite Index was down 1 per cent at 13,467.97 and the CHINEXT was down 1.46 per cent at 2,700.53. A net outflow of 6.922 billion yuan from the North during the day.

Along with the a share market's obvious differentiation trend, three big period index day trend also appeared the differentiation. The leading CSI 300 Index index futures contract IF2011 and Shanghai 50 index futures contract IH2011 closed up 0.24% and 0.63% , respectively. As for the main CSI 500 index futures contract IC 2011, it closed down 0.78% .

Lei Mao, a researcher at the Guotai Junan Futures, said the strength of the rebound after the National Day holiday was one of the reasons for the recent drop in a-shares. Prior to the fundamental did not appear to a greater extent of the substantive benefits, but a shares still appeared after the section of the greater extent of the upward. The current decline is part of the short-term overdraft after the rise in the market led to a pullback.

However, the US election boots, after landing, the market risk appetite is expected to pick up, the probability of improving investor enthusiasm to enter the market. In addition, the Political Bureau meeting this year, the Central Economic Work Conference will set the tone for next year's policy, in Mao Lei's view, once the policy side to continue a moderate and loose environment, it will have a relatively obvious supporting role for the stock market. "Of course, if the policy side turns to deleveraging, preventing and resolving financial risks, and monetary policy tends to tighten, it will further depress the stock market, " he said.

In Green Dahua futures financial futures chief researcher Zhao Xiaoxia, the a-share market is likely to strengthen during the year. "after all, the economy has not yet returned to full normalcy, so monetary policy is expected to continue for some time to come, and the Renminbi exchange rate has also been relatively strong recently, so the appeal of a-shares is still strong, " she said.

However, Zhao Xiaoxia also admitted that some risk factors still exist in the a-share market for some time to come. For example, monetary policy is likely to tighten more than expected, and the US election will further dampen risk appetite.

In the short term, investors should stay on the sidelines, he suggests. After all, trading volume in the two cities continued to fall, in the final boots, before landing, it is difficult to predict a more obvious trend market, the probability of a wide oscillation. At the top of the range, the rebound is more difficult, easy to fall hard to rise; at the bottom of the range, there are still warm policy, economic recovery support. In view of this, he told futures daily reporter, late can be based on changes in the fundamentals, in the event of uncertainty after landing, the opportunity to follow the trend of the formation and participate in a round of the market.

As for index futures, Zhao suggested that investors should focus on the long term, the current stock index futures are still in the state of discount, using the index instead of ETF will have excess returns. Investors can take the low-frequency, low position to do long-term investment.

Source: Futures Daily