In the early morning of January 27, the Federal Reserve meeting that attracted global attention continued to emphasize that it would raise interest rates soon, and there was nothing new in the content released. There is no doubt that the Fed’s interest rate hike has become the biggest negative for the market, and the global investment market is paying attention to this latest trend. As expectations of interest rate hikes continue to strengthen, the reaction of the stock market and commodities has not been dramatic, but rather dull. Is it because the market has reacted and digested it in advance, or has the risk not been fully released?
The author believes that the signal released by this interest rate meeting will have limited impact on the market, and we need to beware of risks arising from interest rate hikes starting after the first quarter. The core negative factor in market speculation now is interest rate hikes, because the market always has to find the focus of speculation. At present, only this factor can make waves in the market. The core logic of commodity operation is mainly supply and demand. Only the main contradiction between supply and demand will dominate the price trend of commodities. If the demand for goods is strong but supply is insufficient, even raising interest rates will not help. Raising interest rates cannot increase supply out of thin air.
Regarding the issue of interest rate increases, professional analysts believe that interest rate increases are carried out gradually and not in one step. Moreover, the Federal Reserve has also stated that the interest rate increase operation is flexible. In order to avoid excessive disturbance to the financial market, the Federal Reserve will fully communicate with the market. Give enough room for buffering to avoid repeating the mistakes of history.
On the 27th, except for gold and silver, which saw a large decline in the commodity market, the trend of other commodities was stable. Among them, crude oil has risen to around US$90/barrel due to the possible outbreak of military conflict between Russia and Ukraine. Driven by its rise, the prices of PTA and short fiber Cotton continues to rise sharply today, while cotton remains volatile at high levels, with no signs of short-term downward adjustment. Tomorrow is the last trading day, and the market is basically calm, waiting for guidance from the spot market after the holiday.
At present, the cotton spinning industry’s raw materials and finished products are in low inventory, and they will be replenished in mid-to-late February. By then, corporate production and sales activities will gradually return to normal. Whether the cotton market can pick up is worthy of attention.
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