On March 6, local time in the United States, the U.S. Senate voted 50 in favor and 49 against to pass a US$1.9 trillion economic stimulus plan to respond to the economic impact of the COVID-19 epidemic. After more than 24 hours of continuous deliberation, this bill passed the most difficult hurdle, bringing new hope to the financial markets in the United States and global markets. Although the House of Representatives will vote on the version passed by the Senate this week, there is basically no suspense between procedural review and signing into law. Democratic congressmen believe that the economic stimulus plan is a “rescue plan for the United States” that will help the United States defeat the epidemic and restore the economy as soon as possible.
Pinning hopes on the U.S. economic stimulus to bring about a new round of commodity boom, all parties in the market are full of expectations for cotton futures to open higher. Zheng cotton opened higher in the morning of March 8, with the main CF2105 contract reaching an intraday high of 16,270 yuan/ton. However, some relevant people said that the rebound of Zheng cotton was less than expected, the long and short battle was fierce, and the intraday rise did not continue, and then fluctuated, indicating that the current cotton market still lacks strong driving factors. Furthermore, the U.S. trillion stimulus bill has already been reviewed, and the market has already digested some of the positive expectations. In addition, U.S. inflation risks have not been effectively dealt with, which may create hidden dangers for the market later.
According to feedback from several large trading companies in the Mainland, Zheng cotton futures fell at a low level last week, and downstream purchasing enthusiasm increased. There was an endless stream of people buying spot goods at bargain prices. The daily cotton trading volume of some companies even reached the cumulative volume since the Spring Festival. However, Zheng Cotton stopped falling and rebounded, and the price inquiry immediately cooled down, indicating that the current mentality of downstream companies is relatively sensitive and lacks firm confidence in the forward market. In the face of investors’ enthusiasm for the expected improvement in market demand, concerns about the real industry have not been relieved. In particular, some downstream textile companies are selling yarn at reduced prices and profit margins, which has brought a bit of uneasiness to the market.
Currently, the global epidemic has not yet been fully controlled, and the fight against the epidemic may be a protracted one. In addition, fierce economic competition among major countries is inevitable, and the U.S. boycott of Xinjiang cotton and its products has not yet been lifted. In the post-epidemic market context, hopes and challenges still coexist in the cotton market. </p