Investment Highlights - Precious metals: Gold has reached a new historical high, with continued recommendations for investment. Recent weak economic data from the US has led to a decline in the dollar index, and gold is poised for an upward trend as it prepares for the upcoming Federal Reserve meeting. Even if the meeting outcomes align with expectations, there is no need to rush to take profits, as the market is likely shifting from recession trading to stagflation trading, indicating a potential slow bull market for gold [2][3] - Copper: If interest rate cuts can facilitate a soft landing, copper prices may rise. LME copper has surpassed $10,000. Despite a weakening US economy, the market appears to be pricing in future stagflation or soft landing scenarios, leading to an upward trend in copper prices. With the domestic consumption peak approaching and downstream operating rates expected to improve, copper prices are likely to rise [2][3] - Aluminum: Continued optimism for rising aluminum prices. Shanghai aluminum prices have increased, driven by significant improvements in downstream operating rates, which have risen to 62.1%. Although the real estate sector remains sluggish, demand from the renewable energy sector is providing effective support. The mid-term impact of US aluminum tariffs is expected to be limited, and the long-term outlook for electrolytic aluminum remains positive [3] - Cobalt: Prices for cobalt intermediates continue to rise, with attention on the dynamics of electrolytic cobalt and policy changes in the Democratic Republic of the Congo. Cobalt product prices have increased, with weekly growth rates of 4.55% for cobalt sulfate and 2.06% for electrolytic cobalt. The market anticipates further supply constraints due to upcoming policy changes in the DRC, which could drive prices higher [3] - Tin: Price increases driven by interest rate cut expectations and supply shortages. Tin prices rose by 2.70%, with operating rates for refined tin in Yunnan and Jiangxi provinces dropping to 28.48%. Supply constraints are expected to persist due to raw material shortages and seasonal maintenance [4] - Lithium: Prices under pressure due to the announcement of a resumption plan at the Jiangxi mine. Lithium prices have declined, primarily due to market expectations surrounding the resumption of production. However, supply growth is expected to slow, and demand from the energy storage sector remains strong, indicating a potential improvement in the carbonated lithium supply-demand balance [4] Investment Recommendations - Companies to watch include Huayou Cobalt, Zhongtung High-tech, Zhangyuan Tungsten, Hunan Gold, Huayu Mining, Shanjin International, Chifeng Jilong Gold Mining, Zijin Mining, Luoyang Molybdenum, Shenhuo Co., and Yun Aluminum [5]

Group 1 - The market anticipates the Federal Reserve will begin a new rate-cutting cycle on September 17, 2025, influenced by recent economic data indicating a softening job market and a moderated inflation rate, providing more room for rate cuts [1][3] - Gold is identified as a key asset benefiting from the expected rate cuts, with historical data showing strong performance during previous rate-cutting cycles, such as a 24% increase in gold prices in 2020 [1][4] - Central banks, particularly the People's Bank of China, have been increasing gold reserves for ten consecutive months, enhancing market demand for gold [1][4] Group 2 - Investors are encouraged to consider gold ETFs, such as the one tracking the AU9999 spot contract, which allows for T+0 trading, and gold stock ETFs that cover the entire gold industry chain [2] - The Hong Kong stock market is expected to benefit from global liquidity easing, with a potential rebalancing of global funds from dollar assets to Asian assets, particularly in technology and innovative drug sectors [2] - In the U.S. market, the anticipated rate cuts and expectations of a "soft landing" may lead to performance growth in tech giants driven by AI technology, although macroeconomic uncertainties could increase market volatility [3]

Investment Rating - The industry investment rating is "Outperform the Market" and is maintained [2] Core Views - The report emphasizes the strong performance of precious metals, particularly gold, which has reached a historical high. The expectation is for a shift from recession trading to stagflation trading, suggesting a potential slow bull market for gold [5] - Copper prices are expected to rise if interest rate cuts lead to a soft landing for the economy. The current market sentiment is pricing in stagflation or soft landing scenarios, with domestic consumption expected to increase as the peak season approaches [6] - Aluminum prices are also projected to rise due to increased downstream operating rates during the traditional peak season, despite ongoing challenges in the real estate sector [6] - Cobalt prices are on the rise, driven by strong demand and supply constraints, particularly with upcoming policy changes in the Democratic Republic of Congo [7] - Tin prices have increased due to supply shortages, with production rates in key provinces remaining low [7] - Lithium prices are under pressure due to the announcement of a resumption plan for a key mining area, although long-term demand remains strong [8] Summary by Sections Industry Overview - The closing index for the industry is at 6795.38, with a weekly high of 6795.38 and a low of 3725.17 [2] Price Movements - Basic metals saw price increases: Copper up 1.49%, Aluminum up 2.80%, Zinc up 3.10%, Lead up 2.07%, and Tin up 2.70%. Precious metals also saw gains, with Gold up 0.46% and Silver up 3.20% [22] Inventory Levels - Global visible inventory changes: Copper increased by 7945 tons, Zinc increased by 2724 tons, while Lead decreased by 4085 tons [30]

Group 1 - The core viewpoint of the article indicates that the CPI growth in August has rebounded due to food and energy, but the slow transmission of tariffs and stable service inflation suggest that inflation will not hinder the Federal Reserve's interest rate cuts in the short term [1][2] - The August CPI in the U.S. showed a year-on-year increase of 2.9% (previous value 2.7%, expected 2.9%) and a month-on-month increase of 0.4% (previous value 0.2%, expected 0.3%) [1] - Core CPI remained stable with a year-on-year increase of 3.1% and a month-on-month increase of 0.3%, aligning with market expectations [1] Group 2 - Core goods saw a month-on-month increase from 0.2% to 0.3%, primarily driven by a rebound in used car prices (from 0.5% to 1.0%) [1] - The transmission of tariffs remains slow, with core goods excluding used cars maintaining a month-on-month growth rate of 0.17%, unchanged from July [1][2] - Service inflation remained stable, with rental inflation being the main contributor, although its sustainability is questionable [2] Group 3 - Short-term focus is expected to remain on employment risks rather than inflation, as the slow transmission of tariffs and stable service inflation indicate that inflation will not be a constraint for the Federal Reserve's rate cuts [2] - The labor market's ongoing weakness has not disrupted the consensus on a soft landing, with the market currently favoring rate cut trades rather than recession trades [2] - Concerns about the U.S. inflation pressure persisting after rate cuts need to be monitored, despite the current demand-side weakness slowing tariff transmission [2]

Group 1 - Morgan Stanley's latest report revises down the market's perception of U.S. employment resilience, indicating a downward adjustment of 910,000 jobs for March 2025, with 880,000 in the private sector [1] - The average monthly job growth from March 2024 to March 2025 has been revised down from 147,000 to 71,000, reflecting a significant decrease in employment growth expectations [1] - The report suggests that the Federal Reserve may have anticipated this adjustment, implying that it will not affect the decision to lower interest rates by 25 basis points in September [1] Group 2 - The benchmark revision only reassesses employment stock prior to March 2025, meaning subsequent monthly changes are not mechanically reduced, which may temporarily alleviate concerns about a sudden cooling labor market [3] - There are two critical warnings for policymakers: the negative revisions for 2023, 2024, and 2025 indicate a potential systematic overestimation in the survey framework, and revisions tend to be pro-cyclical, suggesting that if unemployment continues to rise, further significant downward adjustments are likely [3][4] - The report identifies that the birth-death model has consistently overestimated net job additions, leading to an overcount of 256,000 jobs in 2024, and while adjustments were made for 2025, the gap between actual openings and closures remains narrow, indicating potential for continued negative errors [4] Group 3 - The report argues that the lack of empirical support for the impact of illegal immigration on job numbers suggests that the recent decline in immigration may not be the primary reason for repeated negative revisions [4] - Investors should monitor three key developments: the new seasonal adjustment factors to be released in January, updates to the birth-death parameters that will affect job additions post-April 2025, and the downward adjustment in employment numbers that will also impact hours worked, potentially revising Q1 non-farm productivity growth from 1.2% to approximately 1.7% [4]

Core Viewpoint - The U.S. labor market is showing signs of cooling, with August non-farm payrolls increasing by only 22,000, significantly below the expected 77,000, indicating a potential economic slowdown [1][7][28]. Group 1: Employment Data - In August, the private sector added 38,000 jobs, also below the expected 78,000, while the government sector saw a decrease of 16,000 jobs [1][7]. - The healthcare sector contributed the most to job growth, adding 31,000 positions, while manufacturing and professional services sectors experienced declines [8][9]. - The unemployment rate rose slightly to 4.32%, with long-term unemployment (over 27 weeks) increasing by 385,000 year-on-year, indicating challenges in re-employment for certain demographics [3][12][13]. Group 2: Wage and Hour Data - Average hourly earnings increased by 3.7% year-on-year, down from 3.9% in the previous month, suggesting a moderation in wage growth [3][16]. - The total payroll index showed a year-on-year increase of 5.0%, indicating stable wage growth but with signs of slowing momentum [16][17]. - Average weekly hours remained unchanged at 34.2 hours, reflecting cautious hiring practices among employers [16][17]. Group 3: Economic Outlook - The current employment data suggests a typical post-cycle economic characteristic, with signs of a cooling labor market [4][18]. - Historical analysis indicates that significant negative shifts in non-farm payrolls often correlate with economic recessions, with a 67% success rate in predicting downturns [4][20]. - The Federal Reserve may consider interest rate cuts as a response to the weakening labor market, with market expectations indicating high probabilities for rate cuts in the coming months [5][6][28]. Group 4: Market Reactions - Market expectations for Federal Reserve rate cuts are high, with probabilities of 92%, 72.6%, and 67.9% for September, October, and December respectively [6][28]. - U.S. Treasury yields have declined, with the 10-year yield falling to 4.07%, and the dollar index has also retreated [6][28]. - Gold prices have risen significantly as a safe-haven asset, while U.S. stock indices showed mixed performance, with small-cap stocks outperforming [6][28].

Group 1 - The report indicates that the U.S. economy is showing signs of downward pressure, with non-farm payrolls exceeding expectations but showing structural weaknesses, and inflation rising at a moderate pace [3][5][71] - The U.S. stock market reached new historical highs in August, while U.S. Treasury yields significantly rebounded, with 30-year, 20-year, 10-year, and 2-year Treasury yields changing by +3, -14, -35, and -27 basis points respectively [4][14] - The report forecasts that the 10-year and 2-year U.S. Treasury yields may reach annual lows of 3.6% and 3.2% respectively, as the market undergoes deleveraging and the "de-dollarization" process comes to a temporary halt [3][7][110] Group 2 - The issuance of U.S. Treasuries in August totaled $2.26 trillion, down from $2.51 trillion in the previous month, with a significant increase in short-term Treasury bill (T-Bill) issuance [22][23] - The demand for U.S. Treasuries has shown signs of recovery, although overseas investor demand has weakened due to lower yields compared to European and Japanese bonds [24][25] - The report highlights that the Treasury Department is expected to maintain its current debt financing structure, focusing on short-term T-Bill issuance while keeping long-term debt issuance at lower levels [25][26] Group 3 - The macroeconomic environment for the U.S. Treasury market is characterized by a cautious approach from the Federal Reserve regarding interest rate cuts, with a clear signal for a potential rate cut in September [5][71] - The report notes that the labor market is showing signs of weakness, with non-farm payrolls for July recorded at 73,000, significantly below the expected 104,000, indicating a potential shift in employment dynamics [77][85] - The report emphasizes that inflationary pressures are expected to remain moderate, with the CPI and core CPI showing year-on-year increases of 2.7% and 3.1% respectively, suggesting limited upward pressure on inflation in the near term [79][82]

Group 1: Precious Metals - Gold shows potential for a breakout following the release of PCE data, with a 2.89% increase in COMEX gold prices this week, while silver rose by 4.81% [1] - The long-term trend of de-dollarization and the inflow of ETF funds due to interest rate cuts support a positive outlook for precious metals [1] Group 2: Copper - Copper prices continue to fluctuate at high levels, with a 0.99% increase this week, influenced by China's waste copper policy causing short-term supply disruptions [1] - The estimated reduction of at least 30% in the national recycled copper rod production since August indicates ongoing supply vulnerabilities [1] - Anticipation of increased demand in the upcoming "golden September and silver October" period may provide support for copper prices [1] Group 3: Aluminum - Aluminum prices are expected to rise, with a 0.53% increase this week, driven by inventory depletion during the "golden September and silver October" period [2] - The impact of U.S. aluminum tariffs is considered limited, and the long-term outlook suggests a potential upward shift in the price ceiling for electrolytic aluminum [2] Group 4: Rare Earths - Significant increase in processing fees for heavy rare earths is expected to improve the performance of related companies, with processing fees for certain rare earths rising dramatically from 1,000-2,000 RMB/ton to 18,000-20,000 RMB/ton [2] - The rise in processing fees is attributed to new regulations limiting processing to designated enterprises, increasing the bargaining power of qualified smelting plants [2] Group 5: Cobalt - Cobalt prices have stabilized and are showing signs of recovery, with supply constraints and rising costs affecting production levels [3] - The upcoming policy changes in the Democratic Republic of Congo in September may serve as a pivotal point for cobalt prices, alongside seasonal demand potentially leading to inventory depletion [3] Group 6: Investment Recommendations - Companies to focus on include Zhaojin Mining, Xinyi Silver Tin, Chifeng Jilong Gold Mining, Shenhuo Co., and Zijin Mining [4]

Core Viewpoint - The Federal Reserve is cautiously opening the door to interest rate cuts, but the path ahead is fraught with challenges, as Chairman Powell signals a careful strategy rather than aggressive easing [3][4]. Group 1: Labor Market Concerns - Powell describes the labor market as "peculiar," indicating that the seemingly stable unemployment rate masks a decline in both labor supply and demand [5][6]. - He warns against focusing solely on supply-side constraints, such as immigration policy, which may overlook weakening demand signals that could lead to a rapid deterioration in the job market [5][6]. - A cooling labor market could serve as a mechanism to prevent a vicious cycle of rising wages and prices driven by tariffs [5][6]. Group 2: Internal Disagreements and Inflation Concerns - Despite Powell's efforts to build consensus, there is significant resistance within the Federal Reserve regarding the rationale for rate cuts, with some officials arguing that inflation remains too high [6]. - Cleveland Fed President Beth Hammack expresses skepticism about the temporary nature of tariff-driven price increases, while St. Louis Fed President Alberto Musalem notes that businesses are testing their pricing power [6]. - Concerns about inflation are echoed outside the Fed, with economists warning that Powell's dovish stance may underestimate inflation pressures and overstate labor market risks [6]. Group 3: Cautious Easing Approach - Powell's cautious tone this year contrasts sharply with his assertive stance from the previous year, reflecting a fundamental shift in economic conditions [7]. - The current environment of "high inflation, low interest rates" necessitates a more restrained approach to monetary easing, limiting the potential for significant declines in mortgage rates and borrowing costs [7]. - There are warnings that premature rate cuts could lead to a reversal in policy direction, potentially damaging the Fed's credibility and leading to perceptions of tolerance for inflation above the 2% target [7].

Group 1 - Emerging market stocks and currencies are expected to face their largest decline in about three weeks due to a sell-off in U.S. tech stocks, impacting demand for riskier assets [1] - The MSCI Emerging Markets Currency Index fell by up to 0.3%, while the index reflecting stocks from developing economies dropped by 1.3% [1] - The Taiwanese dollar and South Korean won led the declines, with TSMC (TSM.US) being the largest loser in the stock market [1] Group 2 - The Federal Reserve's interest rate direction is again in focus, with the minutes from the July Federal Open Market Committee meeting to be released soon [1] - Investors are looking forward to comments from Fed Chair Powell at the Jackson Hole meeting for clues on potential easing policies, with traders anticipating a rate cut in September [1] - Faergemann predicts that the Fed will cut rates in September and continue to do so quarterly over the next 12 months, aligning with a "soft landing" scenario [3]