What we’re seeing this week
This week, Steve & Jo discuss the latest market developments, this week’s GDT result and then as something new, Steve has chosen this week’s Chart Of The Week!
There has been a lot of movement in futures market, with markets dropping significantly since we last met. With cooling temperatures affecting cream supplies and buyers pushing back at high prices, futures have come down a bit.
The latest GDT auction was another positive event for the overall index, lifting 1.2%, weaker for fats but generally improved for powders and cheese. SMP was a little weaker after three positive events, with weaker-than-average demand, while WMP prices improved across most contracts as offered volumes increased. Butterfat contracts were mixed with butter suffering from poor demand, while AMF demand came back.
Cheddar prices lifted again but remain aligned with the US market where spot values are correcting. and Mozzarella tanked reflecting the wider faltering EU market.
Chart of the week
China’s central bank, People’s Bank of China last week announced cuts to interest rates on existing mortgages by 0.5 percentage points as well supports to new lending. The central bank reduced the reserves banks need to set aside before making loans. The bank govenor Pan Gongsheng also eased restrictions on borrowing to invest in stocks and shares on Chinese exchanges-which boosted the Shanghai composite index by more than 4% within hours of the announcement.
The easing of restrictions and cuts to interest rates are expected to aid around 5m households, reducing the total interest bill by about 150bn yuan annually. The deposit needed to buy a second home will be reduced to 15%, down from 25% to bolster the Chinese housing market. Authorities have avoided big cuts to borrowing costs due to concerns it could boost property sales and values, recreating a new property bubble. Nevertheless, it is the largest stimulus package since the early days of the pandemic.
Meanwhile, the latest official manufacturing purchasing managers index reading contracted for a fifth consecutive month in September. The PMI stood at 49.8 in September, slightly higher than August’s reading of 49.1. Other measures such as industrial profits plunged while retail sales, industrial production and urban investment all grew at a slower pace for the month.
To boost consumption, local Chinese authorities are issuing vouchers ahead of the National Day holiday in the first week of October. Sichuan province will distribute over 400m yuan, focusing 300m yuan on home improvement products such as renovations. The vouchers offer discounts from 600 to 4,000 yuan and are available in three rounds until the end of October. In Shanghai, 500m yuan will be used for vouchers in dining, accommodation, cinema, and sports sectors, with the first round commencing at the end of September.
