Soochow Securities Co., Ltd.: Both US non-farm payroll data fell below expectations, with a weak labor market leading to a decline in industrial metals

According to the Wisdom Financial APP, Soochow Securities released a research report stating that with the release of lower-than-expected US employment data, market concerns about economic recession have increased, suppressing the rise in copper prices. Both domestic and international copper prices fell this week, with short-term copper prices expected to be affected by recession and interest rate cut expectations, maintaining a volatile trend. Similarly, influenced by US economic data, London aluminum prices fell month-on-month, while domestic aluminum prices in Shanghai fell due to the resumption of electrolytic aluminum production in Sichuan and decreased demand due to safety inspections. Soochow Securities believes that the Federal Reserve is currently reducing its tolerance for weakness in the labor market and has signaled continuity in future interest rate cuts.

Looking back at this week's market performance (September 2nd to September 6th), the non-ferrous sector fell by 5.13% this week, ranking at the bottom in terms of all primary industries. In terms of secondary industries, within the Shenwan non-ferrous metals secondary industry this week, the energy metals sector fell by 3.35%, the metal new materials sector fell by 3.82%, the precious metals sector fell by 3.93%, the minor metals sector fell by 3.96%, and the industrial metals sector fell by 6.38%. Concerning industrial metals, the lower-than-expected number of job vacancies and non-farm employment numbers in the US indicate a weakening labor market, leading to market concerns about US economic growth prospects, resulting in a general decline in industrial metals this week. As for precious metals, weak US labor market data has raised concerns about deflation, causing a decline in gold prices both domestically and internationally. In August, the global gold ETF recorded a significant net inflow, showing optimism for the future trend of gold.

Weekly Outlook:

Copper: Weakening of the US labor market led to a significant pullback in copper prices this week. As of September 6th, LME copper closed at $8,954 per ton, down 3.22% week-on-week; SHFE copper closed at 73,050 yuan per ton, down 1.58% week-on-week. On the supply side, as of September 6th, the average TC of imported copper ore this week dropped to $5.5 per ton, with stable copper ore supply, domestic electrolytic copper weekly output at 214,000 tons, down 3.62% month-on-month; on the demand side, with copper prices falling, demand in the East China market has slightly increased while the Southwest region remains stable. This week, the fundamental situation maintains a weak supply-demand balance, with continuous destocking domestically and a slight decrease in overseas inventories; from a macro perspective, with the release of lower-than-expected US employment data, market concerns about economic recession have increased, suppressing the rise in copper prices, leading to declines in copper prices both domestically and internationally, with short-term copper prices expected to be affected by recession and interest rate cut expectations, maintaining a volatile trend.

Aluminum: Slight resumption of production in Sichuan combined with downstream aluminum enterprises' maintenance led to a month-on-month decline in electrolytic aluminum prices. As of September 6th, LME aluminum closed at 2,342 yuan per ton this week, down 4.27% from the previous week; SHFE aluminum closed at 19,310 yuan per ton, up 2.19% from the previous week. On the supply side, this week, some electrolytic aluminum plants in Sichuan resumed production, with this portion of capacity scheduled to be shut down in 2022. Currently, China's operating capacity in the electrolytic aluminum industry is 43.476 million tons, an increase of 50,000 tons from the previous week; on the demand side, due to insufficient orders and large-scale safety inspections, the operating rate of aluminum plate enterprises decreased by 0.21% month-on-month, the operating rate of aluminum rod enterprises decreased by 48% month-on-month, and the theoretical demand for electrolytic aluminum slightly decreased. This week, due to lower-than-expected US economic data, London aluminum prices were impacted and fell month-on-month, while domestic aluminum prices in Shanghai followed suit due to the resumption of electrolytic aluminum production in Sichuan and decreased demand caused by safety inspections Soochow Securities Co., Ltd. believes that the current supply side of electrolytic aluminum in China has reached the theoretical peak level for the year; on the demand side, with the arrival of the peak consumption season, it is expected to further drive the demand for electrolytic aluminum, and is optimistic about the upward trend of aluminum prices after the consolidation.

Gold: Weak data in the US labor market raises concerns about deflation, leading to a pullback in gold prices both domestically and internationally. As of September 6th, the closing price of COMEX gold was $2526.80 per ounce, down 1.09% on a weekly basis; the closing price of SHFE gold was 573.68 yuan per gram, down 0.07% on a weekly basis. This week, the US recorded 7.673 million job openings in July, below the expected 8.1 million; the ADP employment change in August was 99,000, below the expected 145,000; initial jobless claims for the week ending August 31st in the US were 227,000, below the expected 230,000; non-farm payrolls change in August in the US was 142,000 after seasonal adjustment, below the expected 160,000; the US unemployment rate in August was 4.2%, in line with expectations.

Although the US August non-farm payroll data showed a month-on-month increase, it was still below Bloomberg's expectations, and market expectations of a US economic recession have not diminished; in addition, the lower-than-expected job openings and ADP employment numbers also indicate a weakening labor market in the US. This has raised concerns about the prospects for US economic growth, and due to concerns about economic deflation, gold prices fell across the board this week. On Friday, Federal Reserve Governor Waller reiterated the necessity of "pre-emptive rate cuts" in his final public speech before the September meeting, indicating that the Federal Reserve is currently reducing its tolerance for weakness in the labor market and signaling continuity in future rate cuts; in terms of funds, global gold ETFs saw a net inflow of 28.5 tons in August, maintaining a rapid inflow trend, and it is expected that gold prices will further trend upwards after consolidation.

Risk Warning: Continued strength of the US dollar; downstream demand falling below expectations