China Securities Co., Ltd.: U.S. non-farm payrolls fall short of expectations, supporting a continued rebound in non-ferrous metals.

China Securities Co., Ltd. released a research report stating that last week the non-ferrous metal sector exhibited a trend of synchronized increases in stock and futures. On one hand, non-ferrous metal prices maintained their strength against the backdrop of supply-side disruptions, decent consumption, and easing expectations for interest rate hikes in the U.S., with gold prices hitting a seven-week high, copper prices approaching historical peaks, and aluminum reclaiming the 24,000 yuan mark. On the other hand, extreme market styles are rebalancing, with the underweighted non-ferrous sector continuously attracting capital inflows due to its excellent performance and lower PE ratios. The firm believes that non-ferrous commodity prices, driven by solid fundamentals, are likely to maintain a strong momentum; currently, the PE recovery for non-ferrous equities is not sufficient, indicating further room for price increases. Key points from China Securities Co., Ltd. are as follows: Gold: Weak U.S. employment data diminishes interest rate hike expectations, with gold prices reaching a seven-week high. Last Friday's report revealed that July's U.S. non-farm payrolls unexpectedly decreased by 23,000, contrary to economists' predictions of an increase of 80,000. The unexpected drop in non-farm employment weakened the likelihood of rate hikes this year, with the Fed's monitoring tools indicating that traders perceive the probability of a U.S. rate hike in September to be about 44%, down from 57% prior to the report's release. The cooling of rate hike expectations contributed to the rebound in gold prices. In the medium to long term, the structural expansion of deficits in major economies, strategic gold purchases by central banks, and escalating geopolitical conflicts continue to allow gold to maintain a premium over sovereign credit systems. A report from the World Gold Council indicates that 89% of central bank reserve managers expect global central bank gold reserves to continue increasing over the next 12 months. Copper: The C-L price spread is widening, and non-U.S. inventories are being siphoned off, with copper prices nearing historical highs. Since June 30, the Comex-LME price spread has been expanding, highlighting market expectations surrounding President Biden's announcement of tariffs on copper. As the C-L spread widens, arbitrage activities involving shipping goods to the U.S. are intensifying, and non-U.S. regional inventories continue to decline, tightening spot availability, with LME copper (0-3) rising to $115 per ton. The Democratic Republic of the Congo has banned copper concentrate exports, and in the first quarter of 2026, the country exported 18,900 metric tons of copper concentrate; although this quantity is relatively small, it reflects increased resource protectionism, heightening market concerns over supply stability. Global copper mine output this year once again fell short of expectations, with some leading mining companies lowering their annual copper production guidance. The spot TC for copper concentrate has fallen to -$173 per ton, and with non-U.S. inventories low and shock resistance weak, combined with diminished expectations for interest rate hikes, copper prices are poised to hit historical highs. Aluminum: A decrease in inventory leads to qualitative changes, with aluminum prices attempting to stabilize around the 24,000 yuan level. This week, LME aluminum rose by 2.3%, and domestic inventories officially fell below 1 million tons. Combined with the favorable overall atmosphere for non-ferrous metals, this provides support for aluminum prices. In the current year, the Middle East has reduced production capacity by 2.86 million tons, and Mozambique has shut down 520,000 tons of capacity, resulting in a 1.2 million ton shortfall in global electrolytic aluminum supply for the year. Domestic and foreign inventories continue to deplete, with domestic inventories nearing the critical level of 900,000 tons and LME inventories dropping below 250,000 tons. The Middle East has begun to resume production and there are concerns about the commissioning of millions of tons in new overseas capacity; however, those will only contribute to future output and do not address the ongoing shortage this year. The short-term gap will drive a rebound in aluminum prices, and the excellent performance of aluminum companies supports the recovery of aluminum-related assets. Risk warnings: 1. A significant global economic recession leading to a cliff-like decline in consumption. The World Bank, in its latest "Global Economic Outlook," raised its forecast for global economic growth in 2026 from 2.3% to 2.6%; however, recent years have shown a trend of slowing economic growth. Should the global economy fall into a deep recession, there will be a substantial impact on the consumption of non-ferrous metals. 2. U.S. inflation spiraling out of control, with the Fed's monetary tightening exceeding expectations, and a strong dollar suppressing equity asset prices. The U.S. has struggled to effectively control inflation, leading to continued rate increases. The Fed has implemented substantial consecutive rate hikes, but services, particularly rents and wages, remain sticky, constraining the decline in inflation. If the Fed maintains high-rate increases, it would be unfavorable for non-ferrous metals priced in U.S. dollars. 3. Domestic consumption growth in the new energy sector falling short of expectations, with the real estate sector remaining persistently sluggish. Although policies to stimulate real estate sales have been relaxed to varying degrees, residents' willingness to purchase remains low, and progress in alleviating real estate companies' debt risks is slow. Should sales continue to show no improvement, future completions in the real estate sector may face risks of stalling, negatively impacting the consumption of certain non-ferrous metals in the domestic market.