Overseas and Current Affairs Group
Zhang Jingjing S1090522050003 Chief
Zhang Antian S1090522070002 Team Leader
Mingnan Pei Report Contact: Researcher
Luobin Wang Report Contact: Researcher
Report published: November 22, 2022
Text | China Merchants Macro Zhang Jingjing team
Core ideas
US: Short-term "retaliatory" consumption, but US stocks tumbled amid fiscal recession and monetary tightening.
Fundamentals: The United States lifted domestic epidemic restrictions in March and entry in June. Since the liberalization, the number of new confirmed cases and deaths has remained low. After the epidemic prevention was liberalized, on the production side, the industrial capacity utilization rate and manufacturing production index recovered strongly; On the demand side, retail data performed strongly in the short term, and had three advantages: first, "retaliation" outings and catering consumption after the epidemic prevention was released, second, the purchase demand for non-durable goods in the school season, and third, holiday retailers' promotion to inventory.
Policy aspects: As the impact of the pandemic stabilizes, the fiscal does not need and cannot roll out huge transfer payments. Since the beginning of this year, the pace of Fed interest rate hikes has become tighter, and the dot plot from December last year to September this year has been continuously revised up interest rate hike expectations.
Asset prices: U.S. stocks tumbled after the full lifting of the domestic lockdown until they rebounded after entry restrictions were lifted on June 12. Since the full lifting of the lockdown in March, only energy has risen, and the mandatory option is significantly better than the option, the healthcare, industrial and public utilities have remained resilient, and growth and real estate stocks have fallen sharply.
Eurozone: A "worse" version of the United States.
Fundamentals: In February this year, the EU began "internal free travel", and the announcement of the full lifting of the lockdown by Germany and France in March also marked the beginning of the eurozone "lying flat". After the liberalization of epidemic prevention, the production side and industrial production index returned to the pre-epidemic level, but the forward-looking prosperity indicator industrial confidence index declined; On the demand side, under the downward pressure of energy supply, inflation and the economy, consumption is still in a downward trend after the full lifting of the lockdown. Overall, the degree of recovery after the liberalization of epidemic prevention in the eurozone is significantly less than that of the United States.
Policy: Eurozone fiscal policy is still loose this year, but after that, the fiscal policy stance will most likely turn to neutral. After the epidemic prevention was relaxed, the European Central Bank accelerated Taper and planned to raise interest rates, and the interest rate hike cycle officially began in Q3 this year.
Asset prices: After Germany and France began to "coexist" in March, the equity market volatility weakened due to the fermentation of the tense expectations of the European energy crisis and the increase of downward pressure on the economy. Structurally, similar to the U.S., only energy rose, and the required option was significantly better than the option, the healthcare, industrials and utilities remained resilient, and growth stocks fell.
UK: Consumption remains sluggish after "coexistence", and there are structural opportunities in the stock market.
Fundamentals: On February 21, the UK government announced its "Living with the Coronavirus" plan, and in March all entry restrictions were lifted. After the liberalization of epidemic prevention, the production side and industrial production index entered a downward trend after a short-term recovery; On the demand side, consumption is still sluggish after the full lifting of the lockdown, and the retail sales index has been declining month by month since February this year.
Policy aspects: Fiscal policy has repeatedly wavered, with the massive tax cuts introduced by former Prime Minister Truss in September being undone, and the government's decision in November to raise taxes and reduce fiscal spending in the coming years. Monetary policy has been firmly tightened, and the pace of interest rate hikes by the Bank of England has accelerated since February this year.
Asset prices: After the epidemic prevention was released in February and March, the stock market was volatile and volatile due to multiple factors, but the decline was not deep. Structurally, since the lifting of the lockdown in February, energy stocks have performed the best, with technology and healthcare relatively dominant, and the necessary choice is better than the optional.
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1. The United States: There was "retaliatory" consumption in the short term, but US stocks tumbled heavily under fiscal recession and monetary tightening
(1) The United States lifted domestic epidemic prevention restrictions in March this year and opened entry in June
The United States tightened anti-epidemic measures during the Delta outbreak in July 2021 and the Omicron outbreak in December 2021, including the reinstatement of mask orders and the imposition of additional entry quarantine restrictions. Since March this year, states in the United States have successively announced the full lifting of lockdowns, and on March 26, all states ended the indoor mask order, so that the US epidemic prevention policy began to "lie flat". Q2 was further relaxed, with the United States announcing on April 18 the lifting of the mandatory mask mandate on public transportation and transportation hubs; The June 12 lifting of the order for international visitors to show a negative test before boarding a flight to the United States.
The main reasons for the full lifting of the lockdown this year are the significant cooling of the Omicron epidemic in March, the lower fatality rate of the Omicron variant, the significant increase in vaccination rates, and the resistance of the public to mask orders and social distancing controls have also contributed to the full lifting of the lockdown in the United States. In view of the fact that asymptomatic and mild patients are no longer mandatory to report after "lying flat", and nucleic acid testing is no longer free, the number of new confirmed cases in European and American countries since April may be significantly low, and the new deaths may better reflect the severity of the epidemic. After the current round of epidemic prevention measures in the United States was fully lifted, the epidemic has not rebounded significantly, and the number of deaths has remained within 4,200 per week since April 2022.
In the early spring of 2021, the United States experienced a shortage of medical resources in the outbreak caused by the α variant. The peak number of ICU new crown patients in the Omicron epidemic was lower than the peak number of new crown patients in the ICU in Q1 2021. The proportion of young people hospitalized due to the new crown has been greatly reduced, and the proportion of elderly people over 65 years old in the last 1 month of hospitalization has remained above 60%, and the proportion of elderly people over 50 years old is more than 78%.
(2) After the liberalization of epidemic prevention, residents' consumption exceeded expectations
1. Employment: The labor market is difficult to cool down after the epidemic
The average U.S. unemployment rate in 2019 before the pandemic was 3.7%. In April 2020, the unemployment rate in the United States soared to 14.7% due to the first round of the epidemic, and then gradually declined, and after the full lifting of the lockdown in March this year, the unemployment rate remained in the range of 3.5%-3.7%, which is at a historical low.
Since the beginning of this year, the US labor force participation rate has fluctuated between 62.1% and 62.4%, which is still significantly far from the pre-pandemic level (above 63%).
Why is the job market so in short supply? First, some older people (seemly) have permanently withdrawn from the workforce. Since the post-pandemic recovery, the high labor force participation rate in the US age group of 25-54 is almost the same as before the pandemic, but as of October, the labor force participation rate of 55 and older is still 1.4 percentage points lower than before the pandemic (February 2020). In addition, the possibility of telecommuting after the pandemic and giving workers more "security" has made it less attractive to jobs that cannot be telecommuted, and the job vacancy hub has moved up significantly, which is also the main reason for the upward shift of the hourly wage growth center (compensating for the "sense of security"). In other words, there are two kinds of "permanent" and structural shocks in the US labor supply after the epidemic.
2. Industrial production has also recovered strongly
From February to October 2022, capacity utilization in the United States remained above the level of the same period in 2019. The capacity utilization rate of all industrial sectors in the United States in October this year was 79.88%, 2.36 percentage points higher than the same period in 2019.
The manufacturing production index also began to exceed the level of the same period in 2019 in February 2022. As of October, the manufacturing production index recorded 102.92, 4.48 higher than the same period in 2019. Since 2021, the epidemic prevention policy in the United States has become looser, especially in March this year, the epidemic prevention has completely "laid flat", which is conducive to the rapid recovery of industrial production.
3. The short-term performance of consumption after the lifting of the lockdown is strong, but it may be difficult to sustain
After the full liberalization of epidemic prevention, retail sales data performed strongly in the short term, and consumption data exceeded expectations. From March to September, US personal consumption remained at 8%-10% year-on-year, and from March to May, the year-on-year growth rate of US service consumption was more than 10%, and it has not fallen significantly since then; From May to July, the consumption of non-durable goods in the United States increased by more than 10% year-on-year. In addition, the University of Michigan consumer confidence index bottomed out in June. Factors driving strong U.S. consumption include:
1) "Retaliation" outings and catering consumption after the liberalization of epidemic prevention in the United States. After the epidemic, the consumption of durable goods and non-durable goods in the United States has experienced a process of soaring and falling, that is, "retaliatory consumption"; And service consumption has been suppressed. The full lifting of epidemic restrictions in June coincided with the peak summer travel season from June to August, and residents showed enthusiasm for "retaliatory" service consumption. At present, the US hotel occupancy rate has basically returned to the level of a normal pre-pandemic year.
2) August ushered in the first fully in-person school season after the pandemic, boosting demand for non-durable goods such as clothing, sporting goods, hobbies, books and music stores. 3) The holiday is approaching, and retailers promote to go to stock. In the second half of 2021, the rush to stock up and the supply chain crisis led to a large number of orders being shipped to warehouses and shopping mall shelves after the holiday, and retailers are still facing the problem of inventory backlog. 4) The rapid decline in gasoline prices in June-August also boosted driving enthusiasm and pushed U.S. motor vehicle and parts sales in August to exceed expectations.
On the whole, the liberalization of epidemic prevention in the second quarter stimulated the consumption of services and non-durable goods in the United States in the short term, or it may be related to coinciding with the peak travel season and school season. It is expected that as the seasonal drivers subside, domestic demand for consumption by US residents will weaken. Looking forward, the unemployment rate in the United States will enter an upward trend, while the contradiction between labor supply and demand will be further eased, wage growth will also slow down, and residents' employment and income expectations will deteriorate. In addition, the level of savings of US residents soared to a high level in 2020 and 2021 due to large government subsidies. And after several waves of retaliatory consumption in the United States, savings levels have returned to low levels.
(3) The withdrawal of transfer payments and the acceleration of the pace of austerity
1. Fiscal policy: halve the federal fiscal deficit in 2022
On October 21, 2022, the U.S. Treasury Department released data showing that the U.S. federal government deficit reached $1.375 trillion in fiscal 2022, halving the figure of $2.776 trillion in fiscal 2021. The data shows that the US fiscal revenue in fiscal 2022 was about $4.896 trillion, up from $4.046 trillion in fiscal 2021, and fiscal spending was $6.272 trillion, down from $6.822 trillion in fiscal 2021. The federal fiscal deficit as a percentage of U.S. GDP fell to 5.5% in fiscal year 2022 from 12.3% in the previous fiscal year. As the impact of the pandemic recedes, the government does not need huge financial support.
Affected by the economic stimulus policies adopted in response to the epidemic, the US fiscal deficit reached a record of $3.13 trillion in fiscal 2020 and $2.77 trillion in fiscal 2021. The fiscal deficit in fiscal 2019 was just $983.6 billion.
2. Monetary policy: The Fed's interest rate hike and interest rate hike expectations are gradually tightening
Since December last year, the Fed has accelerated Taper, plans to accelerate QE reduction from January this year and end the current round of QE around March, and conveys the message that interest rates may be raised three times in 2022 through the dot plot. In January this year, the Fed gave forward guidance for raising interest rates and reducing its balance sheet, and in March it raised interest rates by 25BP as scheduled, and the dot plot conveyed the message that it will raise interest rates 7 times in 2022 and 4 times further next year. In May, the Fed raised interest rates by 50BP and decided to reduce its balance sheet from June, and the four interest rate meetings since June have maintained a rhythm of 75BP rate hikes. In fact, the dot plot from December to September this year has been constantly revising the rate hike forecast. There are two possibilities for this change: one is that the Fed always "wait-and-see"; Second, the Fed has been planning for a long time, but it is worried that it will put great pressure on the market after raising the expectation of a one-time interest rate hike, so it chose the "warm boiled frog" upward adjustment method.
(4) Structural opportunities under the heavy decline of US stocks: essential, medical, industrial resilience
U.S. stocks tumbled heavily after the sharp liberalization of China on March 26, until a rebound after the lifting of entry restrictions on June 12. So far in Q2 this year, growth stocks have fallen the most due to the rapid rise in interest rates. Between March 26 and November 18, the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average fell 13.3%, 22.4% and 3.5%, respectively. Structurally, energy alone rose, with the option clearly better than optional, with healthcare, industrials and utilities remaining resilient, and growth and real estate stocks falling sharply. From March 26 to November 18, the sector performance was ranked as energy (16.3%)> consumer (-0.6%)> healthcare (-1.5%)> industrial (-4.4%)> utilities (-5.9%)> materials (-10.4%)> finance (-10.8%)> information technology (-17.2%)> real estate (-19.4%)> optional consumption (-24.7%)> communication equipment (-29.9%).
Q2-Q3 10-year Treasury yields largely maintained an upward trend, retreating slightly in July and November as tightening expectations eased. The Q2-Q3 dollar index remained strong, retreating from November highs.
The Eurozone: a "worse" version of the United States
(1) In February, the EU opened "door-to-door" tourism, and in March, Germany and France significantly relaxed epidemic prevention restrictions
From November to December last year, major countries in the Eurozone tightened epidemic prevention due to the Omicron epidemic, and this year's Q1 was fully unblocked. The more important time point is: on March 14, France lifted most of the epidemic prevention restrictions: the vaccine pass measure was canceled, no vaccine pass was required to enter catering and cultural venues, only public transport and medical institutions were still required to wear masks, and the company's internal epidemic prevention policy was left to the company's discretion. On March 20, amendments to Germany's Infection Protection Act came into effect, removing most of the nationwide epidemic prevention measures and retaining only a few minimum requirements. Except on public transport, people no longer need to wear masks.
In terms of entry and exit, the EU has implemented new EU rules on safe travel harmonization since February 2022. As long as EU residents bring proof of vaccination or Covid recovery or proof of a negative test, they can travel freely within the EU27.
The number of new deaths in a single day in major eurozone countries increased significantly in July and October this year, but the high point after the lifting of epidemic prevention was lower than the historical peak before the lifting of lockdowns. After the announcement of the lifting of the lockdown, even if the epidemic situation in Europe fluctuated, the epidemic prevention policy was no longer tightened, and it chose to completely "lie flat".
After the lifting of the lockdown, the pressure on the Eurozone's healthcare system has increased, especially the shortage of medical staff. In April 2022, a survey of hospitals in Germany by the Association of Senior Hospital Physicians showed that 20% of hospitals in Germany believe that the current emergency nursing department is under pressure, and 60% of hospitals have nursing staff below the minimum standard, and are forced to postpone surgery due to staff infected with the new crown.
(2) After the liberalization of epidemic prevention, production resumed but consumption was sluggish
1. Unemployment is at historic lows, and strikes have led to rising labor costs
After the full lifting of lockdowns, unemployment in the eurozone is significantly lower than in normal years before the outbreak of the pandemic. The average unemployment rate in the eurozone in 2019 was 7.6%, rose to 8.6% during the pandemic in 2020, and continued to decline throughout 2021, falling to less than 7% in January 2022. As of September 2022, the unemployment rate in the eurozone stood at 6.6%, which is at an extremely low level in history. The unemployment rate in Germany was 3% in Germany and 7.1% in France, which is similar to pre-pandemic levels.
After the liberalization of epidemic prevention, a wave of strikes in major eurozone countries pushed up labor costs. In March 2022, hundreds of flights in Germany were cancelled or delayed due to a warning strike by German service industry unions demanding higher hourly wages for ground staff at airports. In June 2022, Lufthansa AG announced that it had cancelled more than 3,000 flights this summer due to staff shortages, strikes and the coronavirus pandemic. The wave of strikes also pushed up the euro area labor cost index, which in the second quarter of this year, the euro area hourly labor cost index was 4.06% year-on-year; Germany's hourly labor cost index was 4.61% year-on-year; All are at all-time highs.
2. The industrial production index recovered as before, but the forward-looking prosperity index declined
The euro area has a relatively high degree of industrial recovery due to the earlier liberalization of epidemic prevention and has completely "laid flat". The industrial production index of the 19 eurozone countries stood at 107 in September 2022, significantly higher than the 104.5 in the same period in 2019. In Q4 2022, the manufacturing capacity utilization rate of the 19 countries in the eurozone was 81.4%, also higher than the 81.2% in the fourth quarter of 2019. In the second quarter of 2022, the manufacturing capacity utilization rate of the 19 countries in the eurozone exceeded the level of the same period in 2019. However, the industrial confidence index, which is a forward-looking indicator, has fallen rapidly since March this year, and the Russian-Ukrainian conflict and the energy supply crisis may be the main reasons. The industrial confidence index of the 19 countries of the eurozone was -1.2 in October 2022, compared to a high of more than 13 from July last year to February this year. Eurozone manufacturing PMIs have been declining for the first 10 months of the year, settling below the boom-bust line from July to October.
3. Constrained by high inflation and energy supply problems, consumption will not rise but fall after the liberalization of epidemic prevention
After the lifting of the lockdown, the eurozone consumption situation is not good. After choosing the "coexistence" policy for epidemic prevention, retail sales in Europe continued to decline. The retail sales index of the 19 eurozone countries (2015=100) continued to decline from 114.9 to 112.7 from March to August this year, and despite the lifting of all epidemic restrictions, European consumption was sluggish due to downward pressure on the economy, high energy prices, and wage growth lagging far behind inflation. Consumer confidence in the eurozone has fallen sharply since March and is now lower than it was during the initial outbreak of the pandemic in 2020.
Why is it the same comprehensive liberalization of epidemic prevention, the same travel season and school season; European consumption is still sluggish? There are two main differences between the United States and Europe:
1) The "residual temperature" of US fiscal transfers: After the epidemic, the United States issued three rounds of financial subsidies, totaling about 25% of GDP in 2020; Household savings have increased significantly, and the "residual temperature" of financial subsidies supports retaliatory consumption after the lockdown. In contrast, European countries spend less on subsidies.
2) Greater inflationary pressures and downward pressure on the economy in Europe: Energy supply problems caused by the Russia-Ukraine conflict have caused energy prices in Europe to soar and exacerbated residents' price concerns about the winter of 2022-23. The US CPI growth rate began to fall after reaching a peak of 9.1% in June, and domestic oil prices were also controlled by the efforts of the Biden administration and other parties. However, the growth rate of the eurozone harmonized CPI is still climbing, reaching a record high.
(3) Policies before and after the liberalization of epidemic prevention
1. Fiscal policy will remain loose in 2022, but may turn neutral thereafter
The European Commission said in March 2022 that it would slightly tighten fiscal policy after three years of injecting capital into the economy due to the pandemic. The European Commission recommends that EU governments move from their current supportive fiscal stance to a neutral fiscal stance in 2023; But it also said that given the challenges posed by Russia's invasion of Ukraine, governments should be prepared to resume supporting the economy with public funds.
On November 11, 2022, the European Commission released its autumn economic forecast, which believes that the government fiscal deficit has been reduced due to the large-scale reduction in pandemic subsidy spending, and the EU forecasts that the EU deficit rate will account for 3.4% of GDP this year and slightly increase to 3.6% next year.
2. After liberalization, the European Central Bank accelerated Taper and brewed interest rate hikes, and Q3 officially opened the interest rate hike cycle
The ECB began Taper in September last year, and this year's Q1 accelerated the end of QE while considering a rate hike. Q2 ECB executives turned hawkish and repeatedly mentioned that "interest rate hikes will start after ending bond purchases", and the June interest rate meeting said that July completely ended QE while guiding interest rate hike expectations. The ECB raised interest rates by 50 BP in July, 75 BP in September and October. In addition to the interest rate hike tool, in October the ECB also raised the interest rate on TLTRO III by 50BP and the interest rate on statutory reserve requirements by 100BP, and ECB President Christine Lagarde also mentioned the possibility of QT and will decide on the course of balance sheet reduction in December.
(4) The overall decline of the European stock market, the necessary and defensive industries resisted
European stocks fell sharply in February after the EU27 liberalization coincided with the outbreak of the Russian-Ukrainian war. After the liberalization of epidemic prevention in Germany and France in March, the overall volatility of the equity market weakened with the fermentation of tense expectations of the European energy crisis. From February 1 to November 18, the Eurozone STOXX50 index, Germany's DAX and France's CAC 40 index fell by 6.0%, 6.7% and 5.1%, respectively. Structurally, similar to the U.S., only energy rose, the mandatory option was significantly better than the optional, the healthcare, industrials and utilities remained resilient, and growth stocks fell but the relative returns were not so bad. From February 1 to November 18, the sector performance was ranked as energy (14.8%)> healthcare (-1.8%)> essential consumption (-4.7%)> utilities (-7.6%)> communication equipment (-8.4%)> industrial (-8.7%)> finance (-9.0%)> technology (-10.2%)> materials (-13.2%)> optional consumption (-13.6%).
Eurobond yields rose slowly from January to February, and Eurozone bond yields experienced a V-shaped trend during the liquidity crisis in March, and rose sharply in Q2. The euro continued to weaken against the US dollar throughout the year.
3. UK: Consumption remains sluggish after coexistence, and there are structural opportunities in the stock market
(1) Coexistence with the new crown was announced in February, and entry and exit restrictions were relaxed in March
The British government tightened epidemic prevention in the Omicron epidemic at the end of last year, and announced the "Living with the new crown virus" plan on February 21 this year, lifting all existing new crown pneumonia epidemic prevention and control restrictions in England from February 24, positive patients will no longer need to self-isolate, and the government will no longer track close contacts. Coronavirus testing is no longer free from April 1.
In terms of entry, since March this year, the UK has lifted all entry restrictions: no need to fill out a passenger locator form, no vaccination certificate, no need to take any new crown test, no quarantine or quarantine after entry.
After declaring "living with Covid" in February, new Covid deaths in the UK rose in April, peaking at about half of its all-time high. However, the British government has not increased control measures and has maintained a "lie flat" attitude.
As for the reasons for choosing "coexistence", according to the Daily Mail in February 2022, "Since the first stay-at-home order, the UK's pandemic restrictions have lasted for 701 days, three lockdowns, the government has spent £410 billion, conducted 469 million virus tests, canceled 1.5 million surgeries, and held a number of frustrating press conferences." Britain is burdened with heavy human and financial resources, and there is no better choice. ”
(2) The epidemic has had a far-reaching impact on the economy, and the recovery of consumption is less than expected
1. The withdrawal of "long new crown" patients from the job market may greatly reduce the proportion of the UK's labor force
The UK unemployment rate (over 16 years old) averaged 3.83% in 2019, and has been below the 2019 level since the full lifting of the UK lockdown in February this year, and has shown a further downward trend. As of September 2022, the UK unemployment rate (over 16 years old) was 3.6%, 0.2 percentage points lower than the same period in 2019.
But the UK is also currently facing a labour force drain. The share of the UK labour force (three-month moving average) stood above 64% in Q4 2019 and has continued its downward trend since the outbreak of the pandemic, falling to a low of 62.9% as of September 2022. In August, the Office for National Statistics reported that 1.8 million Britons were suffering from symptoms of "Long Covid", equivalent to 2.8% of the country's population. The proportion of people who have recently dropped out of the labor market (those who are unemployed and not actively looking for new jobs) rose to 5%, compared with 2.4% in the same period last year.
2. Industrial production has entered a downward trend after short-term recovery
During the pandemic in 2020, the UK industrial production index plummeted to 81.2. Due to the UK's low degree of epidemic prevention strictness compared with most countries in the world, its industrial production recovered faster, and the industrial production index was at a high level throughout 2021, and the index fell in 2022, but it still significantly exceeded the level of the same period in 2019. As of September 2022, the UK Industrial Production Index stood at 104.9 vs 104.6 in the previous month and 100.8 in the same period in 2019.
The UK manufacturing PMI began to decline rapidly from February this year, and was below the boom-bust line in August-October, and the manufacturing PMI recorded 46.2 in October, a sharp decline from 58.0 in February.
3. After the full lifting of the lockdown, consumption is still sluggish
In September, the UK's consumer confidence index hit a record low of -49.0. The UK retail sales index fell from 103.2 to 97.9 in September from February.
Due to the Omicron epidemic, passenger throughput at major European airports fell from December to February this year, and turned to an increase from March onwards. As of September 2022, the passenger throughput of Heathrow Airport in the UK, Frankfurt Airport in Germany and Paris Airport in France has recovered to 85.29%, 72.84% and 86.10% of the same period in 2019, respectively.
(III) After liberalization, fiscal policy has repeatedly wavered, and monetary policy has been firmly tightened
1. In the future, taxes and expenditures will be increased to reduce the proportion of government debt
In late September this year, former British Prime Minister Truss introduced large-scale tax cuts, which caused financial market shocks. Fiscal policy reversal in November.
On November 17, British Chancellor of the Exchequer Jeremy Hunt said when the autumn budget was announced in Parliament: In order to ensure economic stability, the government will raise taxes and reduce fiscal spending in the next few years. Jeremy Hunt said the £55bn measure would help significantly reduce inflation and mortgage rates. Over the next five years, both underlying debt and UK government borrowing as a share of GDP will fall sharply.
2. After liberalization, the pace of interest rate hikes by the Bank of England accelerated
In December last year, the Bank of England raised interest rates by 15BP for the first time, starting the rate hike cycle. Raise interest rates by 25BP in February and reduce UK government bond and non-financial investment grade corporate bond purchases. After the UK declared "coexistence" on February 24, monetary policy continued to tighten. Hikes were 25BP each in March, May and June, 50BP each in August and September, and 75BP in November. At its November meeting, the Bank of England said uncertainty about the outlook for retail energy prices in the UK had eased following further government intervention. If inflationary pressures increase in the future, monetary policy will continue to respond.
(4) The British stock market has fluctuated, with energy, science and technology, and medical care dominating
The stock market fell sharply after the announcement of coexistence in the United Kingdom on February 24, and the stock market was volatile and volatile after the lifting of entry and exit restrictions in March. Between February 24 and November 18, the UK's FTSE 100 fell 1.5%. Structurally, energy performs best, followed by technology and healthcare, and must be preferred over optional. From February 24 to November 18, the sector performance was ranked as energy (21.9%)> technology (8.3%)> healthcare (7.6%)> industrial (0.6%)> materials (0.5%)> utilities (-2.6%)> compulsory consumption (-2.6%)> finance (-9.4%)> optional consumption (-10.2%)> communication equipment (-21.5%).
From January to February, UK gilt yields rose slowly, and during the liquidity crisis in March, UK gilt yields experienced a V-shaped trend, and Q2-Q3 rose sharply. The pound was weak against the US dollar throughout the year.
Risk Warning
Economies of various countries exceeded expectations; The global epidemic exceeded expectations; The monetary policies of various countries exceeded expectations.
The above content is from the report "Economy, Policy and Asset Performance after the US, Europe and the UK "Lying Flat" - Overseas Epidemic Prevention Liberalization Observation Series (I)" on November 22, 2022, the authors of the report Zhang Jingjing, Zhang Yiping, Zhang Antian, contact Pei Mingnan, Wang Luobin, please refer to the research report for details.
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20221019 Shi or Yin Shi? ——The context of asset allocation (Q4 2022)
20221018 Changes in the rhythm of liquidity regulation: MLF operation review in October 2022
20221018 The prosperity of many industries in the middle and downstream is rising——The prosperity series (3)
20221017 Chinese-style modernization – the report's brightest keyword
20221017 Positive Signals Are Growing – Macro Week View (October 15, 2022)
20221016 Rising Prices – China's Economy under the Microscopy (Issue 26, 2022)
20221015 How to understand the difference between the internal and external inflation situation
20221015 2022 Finance: Positive, Precise and Sustainable
20221014 Core inflation nearing peak – US CPI review for September
20221014 Realization of comprehensive balance - the effect of the package of policies to stabilize the economy in 2022 will be reviewed
20221013 How far is overseas from a liquidity crisis?
20221012 The inflection point in the growth rate of medium- and long-term loans of enterprises has arrived
20221011 China's Overseas Investment Layout in the Post-epidemic Era: Global Industrial Chain Series (II)
20221010 Gold: The left-hand indicator of equity assets
20221009 Summary of important domestic data and information during the National Day holiday
20221009 What does it mean for the unemployment rate to fall in tandem with hourly wages?
20221008 Eleventh holiday overseas those things
20221007 Change expectations to change the trend - the effect of this round of real estate policy measurement
20221006 Upper Limit of ASEAN Industrial Undertaking - Global Industrial Chain Series (I)
20221005 What is manufacturing afraid of? - Japan 2011-2015 mirror review
20221002 Q3 economic growth is expected to be in the range of 3.7-4.2%.
20221001 Industrial Production May Exceed Expectations in September – China's Economy Under the Microscope (Issue 25/2022)
20220930 Highlights, Worries, Opportunities – September PMI Review
20220930 Promoting consumption has become a new goal of policy force——Commentary on the third quarter monetary policy meeting
20220929 New support for credit in the fourth quarter - evaluation of the central bank's establishment of special re-lending for equipment renovation
20220928 Italian election: a puzzle game
20220927 Q4 repair situation does not change - August 2022 industrial enterprise profit analysis
20220926 Is it expected to be fixed? ——Macro Week View (September 24, 2022)
20220925 RRR reduction can be expected
20220924 Bank of England's impossible triangle: fiscal easing, anti-inflation, reserve status
20220923 Real Estate Completion Improvement Momentum Expected to Continue: China's Economy under the Microscopy (Issue 24, 2022)
20220922 The Boundaries of Fed Rate Hikes – September FOMC Review
20220921 Completion recovery: an easily overlooked economic bright spot
20220920 How much space is there for the PBOC to "focus on me"? ——Also commenting on the September 2022 LPR quotation
20220919 The Economy Is Still Doing Additions – Macro Week View (September 17, 2022)
20220918 Merchants Macro | How much does incremental policy have a pulling effect?
20220917 Uneven Hot and Cold Structural Differentiation: China's Economy under the Microscopy (Issue 23, 2022)
20220916 The Urgency of Further Stabilizing Domestic Demand: A Review of August Economic Data
20220915 How much consumption is worth waiting for – outlook for the consumption situation in the fourth quarter
20220915 Understand the combination of "MLF+ deposit rate"
20220914 Poor inflation expectations may renew overseas volatility in June – U.S. CPI analysis for August 2022
20220913 September or June for mini – Macro Week View 0912
20220912 Do not overestimate policy tools and underestimate the effect of stabilizing real estate
20220911 Will the growth rate of social finance rebound in September?
20220909 Inflation's influence on policy will tend to wane – August Inflation Review
20220908 The epidemic in Chengdu and Shenzhen will not affect the economic performance in September
20220908 In the cross-high temperature and power curtailment, which industries are likely to continue?
20220907 How do four new changes affect exports? ——Review of import and export data for August 2022
20220906 Easing the slope of RMB exchange rate depreciation: a comment on the central bank's reduction of foreign exchange reserve ratio
20220906 Decision September - The Context of Large-scale Asset Allocation (September 2022)
20220905 Rising Short-Term Certainty – Macro Weekly View 0903
20220904 Is 3.5% a psychological threshold for the Fed?
20220903 September FOMC may be a watershed - US non-farm payrolls data analysis for August 2022
20220902 Production Repair Travel declined
20220901 Infrastructure investment growth will exceed 10% – August macroeconomic data forecast
20220831 Where is the fiscal space?
20220831 Things are changing – August PMI review
20220830 Is there much pressure on the depreciation of the RMB?
20220829 Understand the correct posture for "flood irrigation"
20220829 Internal Pressures and External Risks: Macro Weekly View 0827
20220828 Possible impact of the European energy crisis
20220828 Q3 or the bottom of the annual industrial profit growth rate - July 2022 industrial enterprise profit analysis
20220827 Powell, who has turned hawkish again, is the key - comments on the meeting of Jackson Hole, a global central bank
20220826 Rising overseas energy and electricity prices may help the mainland export exceed expectations throughout the year
20220825 Five questions about the high temperature in the south: is the impact really coming to an end?
20220824 The impact of power curtailment in Sichuan in high-frequency data
20220823 Review of the effects of this round of policy - from emotional repair, financial support to fundamental improvement
20220822 How to understand the LPR reduction? The balance between real estate and exchange rates
20220822 Policy Focuses on Striving for the Best Outcome – Macro Weekly View 0820
20220821 Where the scales of broad asset classes are tilted
20220820 The political accounting of epidemic prevention does not affect the demand for economic work to achieve the best results
20220819 The path to use the special debt limit may be faster and clearer
20220819 Under the "Chip Quadripartite Alliance", what is the focus of industrial upgrading?
20220818 Looking at the prospects of the mainland's industrial upgrading from the experience of the United States, Japan and South Korea
20220817 Accurately check the RMB exchange rate
20220816 The feasibility of returning to recovery and the decisiveness of real estate at the end of the year
20220816 In the midterm elections, do the Democrats still have a chance of winning?
20220815 Start the interest rate cut cycle - August MLF rate cut commentary
20220814 If oil prices rebound again
20220814 Short-term Objectives and Medium- and Long-term Demands of Policy: Macro Weekly Viewpoint 0813
20220813 Domestic commodity futures and spot prices have picked up one after another
20220812 Find a new fulcrum for social financing
20220811 Stepping on the Rhyme of Inflation - Interpretation of the Monetary Policy Implementation Report for the Second Quarter of 2022
20220810 How does the resumption of inflation in the 19-year pattern affect macro policy? - July inflation review
20220809 Can the Inflation Reduction Act reverse the midterm elections?
20220809 Structural Highlights in the Weak Recovery from the Perspective of the Meso Research Framework: Meso-Prosperity Series (I)
20220808 Evolution path prospect and reconstruction risk assessment of global industrial chain
20220807 Industrial chain advantages may make exports continue to exceed expectations——— July 2022 import and export data review
20220807 Declining Certainty – Macro Weekly View 0807
20220806 Just go down the donkey or have twists and turns? ——The context of large-scale asset allocation (August 2022)
20220806 Overseas markets may return to volatility – analysis of US non-farm payrolls data for July 2022
20220805 China Capital Market Open Handbook 2022
20220804 Industrial chain under the changing situation - the warning that many manufacturing countries have fallen into trade deficits
20220803 Watch for positive signals on price and travel data
20220802 Recovery under Multiple Shocks and Multiple Constraints – Macroeconomic Data Forecast for July
20220802 How will money market liquidity return to neutral in 2020?
20220801 Potential structural highlights of manufacturing falling behind beyond expectations – July PMI review
20220801 Recovery enters a period of divergence - macro weekly view 0731
20220730 Is the U.S. in recession? ——Review of US GDP data for the second quarter of 2022
20220729 Make good use of established policies, persistence is victory – five key answers from the Politburo meeting
20220729 China's export situation from the perspective of export delivery value
20220728 If the Fed "covers" the hole again - July FOMC review
20220727 Dual circulation is upgrading - analysis of import and export commodity structure in the first half of 2022
20220727 After the V-shaped repair of profits, focus on certainty - June 2022 profit analysis of industrial enterprises
20220726 Will the funding rate gap converge in August?
20220725 Short-term position and long-term style of U.S. stocks
20220724 Domestic demand is weak, but the inflection point of Sino-US interest rate differentials has begun to emerge - macro weekly view 0724
20220723 "Off-season" under high temperatures - Economic Observation Series (1)
20220722 What other black swans are overseas?
20220721 How much GDP growth is needed to stabilize employment?
20220720 Balancing real estate stability and risk prevention, LPR quotations remained stable in July
20220719 How recovery transactions will evolve: The context of asset allocation by large class (Q3 2022)
20220717 Four macro scenarios and large-scale asset rotation driven by political cycles
20220716 Fast-paced revenue reduction and expenditure increase, where is the road in the second half of the year?
20220715 Three scenarios for the future: analysis of China's economic data in the second quarter of 2022
20220714 Two key data ahead of the July FOMC: 100BP rate hike?
20220714 Where does the money go?
20220714 Credit Differentiation and Leverage Recovery: A Review of the Press Conference on Financial Statistics in the First Half of the Year
20220713 Residents' initiative to cut off supply and stop the project mortgage impact assessment
20220713 Hidden worries after high export growth
20220712 Dragon Repentance – June Financial Data Review
20220711 Which sectors to watch in July based on profit expectations?
20220710 Start of the pig cycle – June inflation data review
20220710 Pressure to control inflation is still strong, and expectations of interest rate hikes in July strengthen - US non-farm payrolls review in June
20220709 FDI flows into China at an accelerated rate, where does it come from and where is it going?
20220708 Behind the proximity of the euro and the US dollar
20220708 Post-pandemic reshaping of global value chains, exchange rate resilience and manufacturing competitiveness
20220707 Consumption of services is showing signs of improvement
20220706 Where do recession expectations come from and where are they going?
20220705 The double meaning of the central bank's 3 billion investment
20220705 A brief review on the EU Carbon Border Adjustment Mechanism (CBAM).
20220704 Inflation rises as the pandemic recedes – Macroeconomic forecasts (June 2022)
20220702 Structural highlights under consensus expectations of a slowdown in exports
20220701 Changes and unchanged monetary policy in the third quarter
20220701 The internal and external demand drives are switching directions
20220630 Positive signals continue to increase
20220629 If U.S. stocks fall again, can A-shares continue to be desensitized
20220628 The foundation of recovery is not solid, and we actively pay attention to the middle and lower streams
20220627 Three scenario assumptions for economic movements
20220626 Domestic Economy: Recovery Fears Shocks – Medium-term Macroeconomic Outlook for 2022
20220625 Waiting for the blossom to bloom – 2022 Medium-term Macroeconomic Outlook Fiscal Chapter
20220625 Why did the price of rebar futures fall sharply?
20220624 The total volume is not weak, and the structure is good - 2022 medium-term macroeconomic outlook currency
20220623 Will there be a liquidity crisis overseas?
20220622 Exit to the left; Imports to the Right - 2022 Medium-term Macroeconomic Outlook Foreign Trade Chapter
20220621 Inflationary Pressures: Weak Externally and Strong Internally – Inflation in the Medium-Term Macroeconomic Outlook for 2022
20220620 Shock Easing – Macroeconomic Outlook for 2022 Overseas
20220619 The impact of the Fed's rate hike is already being felt
20220618 Local government funds are under tremendous pressure to collect and disburse
20220617 The supply side repairs faster than the demand side
20220616 It's time to consider the conditions for the FED to end the rate hike
20220615 Stick to recovery trading
20220614 Compatible with the economic growth path of dynamic zeroing
20220613 What else should I pay attention to when exports, PMI and social finance exceed expectations?
20220612 The Last Rush in Oil Prices: What If the US CPI Does Not Fall?
20220612 Poor credit expectations are realized
20220611 How will the CPI go in different scenarios in the third and fourth quarters?
20220610 Exports exceeded expectations, are they new or have a backlog in April?
20220609 How to view the game of supply and demand of crude oil?
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