No 809 -Global commodity demand, supply chains and sentiment

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　　BANDSFinancial

　　磐石金融有限公司（ BANDS Financial Limited ）在香港注册成立，是一家持有香港证监会（SFC）2号牌照的期货经纪公司，业务涉及中国以外全球大部分活跃期货及期权市场。

　　Overnight Fed policymakers surprised the markets as the minutes of the December FOMC meeting revealed it may increase the federal funds rate both sooner and at a faster pace than earlier anticipated. Some Fed policymakers noted that it could be appropriate to start reducing the size of the balance sheet. Although as usual, it was short on specifics the unease within the document is evident. The Dow sank 393 points or 1.1% to 36407, the S&P 500 lost 1.9% to 4701 and as rising Treasury yields raised concerns over tech valuations the Nasdaq closed down 3.3% at 15100 on the heaviest selling in a decade.Tomorrow we have the US non-farm payroll for December which is forecast to deliver 425,000 new jobs and an unemployment rate of near 4% which will remove the Fed‘s fig leaf of concern over US employment. As some analysts are forecasting US inflation numbers due on the 12 January at 6.9%, the Fed must act.Perhaps unnoticed by the media at large, following the arrival of omicron in HK earlier in the week, Hong Kong will significantly raise its virus control measures. Although before Christmas the reopening of the land border between HK and the mainland seemed imminent, this is now deferred. Starting tomorrow the government will ban indoor dining after 6 pm, close swimming pools, sports centres, bars, clubs, nightclubs, museums and other venues where people may congregate. The new rules also include banning flights from the UK, US, Canada, Australia, Pakistan, Philippines, France and India. I cannot say what impact this will have on the movement of air cargo which has been a lifeline for Cathay Pacific and a significant input for HK. However, to put this in perspective the measures taken in Hong Kong are a glimpse of the measures that would be taken on the mainland should Omnicron surmount the current border defences.Perhaps in anticipation of covid driven disruption yesterday at a seminar attended by regional leaders, the PBOC, the Ministry of Finance etc. Premier Li called for large cuts in taxes and fees to counter “fresh downward pressures”. He stated, “tax reduction and fee reduction are the most beneficial policy for enterprises, and it has played a key role in responding to difficulties and challenges and maintaining economic operations within a reasonable range.”Following the strict application of its zero covid policy, the seven-day average covid infection rate in China is below 200, it is vaccinating around 2.8 million people per day and happily, there is zero covid in Shanghai, at the same time US daily infection rates are believed to be north of 600,000. I will let you draw your own conclusions should the mainland decide at some point that to prevent its public health system from being overwhelmed it is necessary to implement similar policies as we see in Hong Kong. If China’s defences are punctured and has to implement similar policies as we see in Hong Kong, what will that do for global commodity demand, supply chains, and sentiment？Best regards