Important Note: The Measures for the Administration of the Appropriateness of Securities and Futures Investors were officially implemented on July 1, 2017, and the views and information released through this WeChat subscription account are only for the reference of professional investors of Haitong Securities, and the complete investment views should be subject to the complete report issued by Haitong Securities Research Institute. If you are not a professional investor among Haitong Securities clients, in order to control investment risks, please unsubscribe, receive or use any information in this subscription account. This subscription account is difficult to set access rights, if it is inconvenient for you, please understand. Our company will not regard the relevant personnel as customers because of the attention, receipt or reading of the content pushed by this subscription account; the market is risky and the investment should be cautious.
· Overview ·
Outbreak and vaccine tracking: The U.S. epidemic continues to improve, with an average daily reduction in new cases as of October 22, and the number of new hospitalizations and severe cases in the United States in the week of October 17 is also decreasing. The epidemic in Europe is still worsening, which may be related to a variety of factors, such as colder weather, changes in vaccination levels, and changes in epidemic prevention measures. The outbreak in Southeast Asia is in full remission.
Policy: Fed Chairman Jerome Powell noted that Taper will be completed in the middle of next year and will raise interest rates if it sees serious risks of rising inflation expectations. Russia raised interest rates by another 75BP, the sixth time in the year, with a cumulative rate hike of 325BP. The Fed prohibits senior officials from buying stocks and bonds. The United States decided to withdraw punitive tariffs on many European countries. Turkey cut interest rates by 200BP. Paraguay raises interest rates by 125BP.
Economy: The US service industry boom has rebounded significantly, and with the liberalization of epidemic prevention and control, the US consumption structure has gradually shifted from commodity consumption to service consumption. In addition, employment conditions are still improving. The recent weakening of the eurozone sentiment index may be related to the continuous deterioration of the epidemic in major European countries on the one hand, and the remaining tight supply chain on the other hand.
1
Outbreak and vaccine tracking: The epidemic in Europe is worsening again
The epidemic in the United States continues to ease. As of 22 October, the average daily increase in new cases in the United States fell to 75,000, a decrease of 12.8% from the previous week, and as of October 22, the average daily death toll in the United States rose to 1,692, a slight increase of 3.8% from the previous week. In addition, the number of new hospitalizations in the United States also continued to decrease, as of October 17, the number of new hospitalizations in the United States fell to 44,000 in the week, a decrease of 9.6% from the week of October 10, and a continuous decline since September; and the severe illness rate of new coronavirus patients in the United States is still relatively low.
The epidemic in Europe continues to worsen. As of 22 October, the average daily number of new cases in Europe exceeded 100,000, an increase of 16.8% from the previous week and the highest since August, and as of October 22, the average daily death rate in Europe was 1292, an increase of 3.4% from the previous week. The epidemic situation in major European countries is worsening, and as of October 22, the average daily new cases in Germany, Spain, the United Kingdom, Russia and France increased by 36.0%, 24.0%, 17.2%, 17.0% and 4.9% respectively from the previous week, while Italy alone is in remission (43.5% less than the previous week). In addition, the average daily death rate in Germany, Russia and the United Kingdom is also rising.
The continued deterioration of the epidemic in Europe may be related to colder weather, the degree of vaccination rates and changes in epidemic prevention measures. For example, as of October 20, Russia's full vaccination rate was only 32.5%, far less than other major European economies. France announced that from October 4, in provinces where the rate of covid-100,000 infections per 100,000 people will drop to less than 50 people in seven days, masks will no longer be mandatory on primary school campuses, and the upper limit on the number of receptions will be abolished in all places hosting the public.
The epidemic in Southeast Asia continues to improve. As of 22 October, the average daily new cases in Indonesia dropped to 797, a decrease of 21.9% from the previous week, and the philippines, Vietnam, Malaysia and Thailand all eased, with the average daily new cases decreasing by 35.6%, 8.1%, 19.4% and 4.9% respectively from the previous week. At the same time, the average daily death toll in major Southeast Asian countries has also continued to be low, with Indonesia, Vietnam, Thailand, the Philippines and Malaysia decreasing by 17.9%, 29.2%, 14.8%, 2.4% and 6.4% respectively compared with the previous week as of October 22.
The outbreak in the UK continued to rebound, with the average daily increase in new cases rising to 47,000 as of 22 October, the highest since July and a sharp increase of 17.2% from the previous week, while the average daily death toll also increased by 8.9% from the previous week. However, the number of new hospitalizations and the rate of severe illness were also declining during the week. The outbreak in Israel continues to improve, with both new and fatal cases continuing to decrease compared to the previous week, as well as the number of new hospitalizations and the rate of severe illness.
2
Policy: What does Powell think of the rate hike?
Fed Chairman Jerome Powell: Taper is completed in the middle of next year, and if you see serious risks of rising inflation expectations, you will use tools to lower inflation. Ahead of the November 2-3 FOMC Monetary Policy Meeting, Fed Chairman Jerome Powell delivered his last public address of the month. On October 23, Powell noted in a video conference co-sponsored by the Bank for International Settlements and the South African Central Bank that the Fed is expected to be on track to implement taper and that the process is expected to be completed by mid-2022. At the same time, Powell stressed that the supply chain shortages caused by the epidemic, as well as the resulting inflation and wage pressures, are likely to continue into next year. The Fed will keep a close eye on signs that U.S. households and businesses expect inflationary pressures to persist, and will use tools to lower inflation if it sees serious risks of continued high inflation expectations.
Russia again raised interest rates by 75BP. On Friday, October 22, the Central Bank of Russia announced its latest interest rate decision. Announced a 75BP increase in the policy rate to 7.5%, far exceeding market expectations of 7%, the sixth rate hike in the year, with a cumulative rate hike of 325BP. In its statement, the Central Bank of Russia stressed that the reason for the interest rate hike is that the development of inflation has substantially exceeded the agency's previous expectations, and it is estimated that it will remain in the range of 7.4-7.9% by the end of this year, and the main reason for sustained inflation is still that demand is growing faster than the rate of capacity expansion. The Russian central bank warned that inflation risks are still trending upwards, making real inflation even more away from the bank's policy target of 4%. The Russian central bank said it was open to further rate hikes at future meetings if future developments were in line with forecasts.
The Fed prohibits senior officials from buying stocks and bonds. In its statement, the Fed said it would ban policymakers and senior officials from buying individual stocks and bonds and would limit active trading. 45 days' notice is required for the purchase and sale of securities, prior approval for such transactions, and holding investments for at least one year. In addition, the Fed said, "In times of heightened pressure on financial markets, no buying or selling will be allowed." "Senior Fed officials, including regional Fed chairs, Fed governors and senior staff, will only be able to buy diversified investment vehicles such as mutual funds. The 12 regional Fed presidents will be required to publicly disclose financial transactions within 30 days, a policy that already applies to Washington-based Fed officials and senior officials.
The United States decided to withdraw punitive tariffs on many European countries. On October 21, local time, the U.S. Treasury Department announced that the United States would cancel punitive tariffs on products from Austria, France, Italy, Spain and the United Kingdom. Under the agreement, the United States, the United Kingdom, France, Italy, Spain and Austria agreed to "transition from the existing digital services tax to a new multilateral solution and pledged to continue to discuss the issue through constructive dialogue.". The United States agreed to waive punitive tariffs on the five European countries mentioned above. European countries will retain for the time being a "digital services tax" that angers U.S. companies and government officials. If the new global tax system takes effect within the next two years, these countries will offer tax credits that effectively amount to refunding taxes overpaid by tech companies in the event that global tax agreements are implemented in advance.
Turkey cut interest rates by 200BP. Turkey's central bank cut the benchmark repo rate by 200BP to 16.00%, beating market expectations by 17.5% and 18% previously. It is the second interest rate cut in the year, with a cumulative interest rate cut of 300BP.
Paraguay raises interest rates by 125BP. Paraguay's central bank announced a rate hike of 125BP to 2.75%.
3 United States: Services boom picks up
The service industry boom has rebounded significantly. The US Markit manufacturing PMI index fell to 59.2 in October, falling for two consecutive months. On the one hand, it may be related to the fact that the current supply chain problems in the United States have not been completely alleviated; on the other hand, it may be related to the fact that the labor shortage problem is still serious. However, the services PMI index rose to 58.2 in October, mainly related to the recent ongoing easing of the epidemic.
U.S. industrial capacity utilization was 75.2 percent in September, down slightly from August, and gross industrial output fell 2 percentage points month-on-month in September. This may be related to the fact that the supply chain is still tight.
In addition, employment conditions are still improving. In the week ended October 16, the number of first-time jobless claims in the United States fell to 290,000 in the week, a decrease from the previous week. As the epidemic in the United States continues to ease, the U.S. economy may continue to repair, and the employment situation, especially in the service industry, may continue to improve.
4
Europe: The economy continues to weaken
The economy continues to weaken. In October, the Euro Zone Markit manufacturing PMI index fell to 58.5, a four-month decline, a new low since March; in October, the Markit services PMI index fell to 54.7, a decline greater than that of the manufacturing industry, falling for three consecutive months, hitting a new low since April. The recent weakening of the eurozone sentiment index may be related to the continuous deterioration of the epidemic in major European countries on the one hand, and the remaining tight supply chain on the other hand.
Further, the manufacturing PMI indexes in Germany, France and the United Kingdom are recovering; however, the services PMI index has diverged, the German service industry PMI index is still falling, while the French and British service industry PMI index has rebounded.
In addition, the European consumer confidence index weakened again. The decline in consumer confidence in the 19 eurozone countries widened again in October, as did the 27 countries in the European Union, or related to the recent worsening of the epidemic in major European countries.
-------------------
From the scaled-down version of "2018" to the enlarged version of "2019" (Haitong Macro Liang Zhonghua Research Team)
Is monetary policy loose? Interpretation of the 2nd Quarter Monetary Policy Report (Haitong Macro, Liang Zhonghua, Ying Gaoxian)