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China: Resolutely oppose! New rules: "No exit is allowed"! Erdogan or re-elected President of Turkey; The probability of the Fed raising interest rates in June is more than 70%.

author:China Securities Journal

The U.S. debt impasse has made a breakthrough, and a debt agreement has been tentatively agreed upon, and the draft will be submitted to the Senate and House of Representatives for voting on Wednesday. McCarthy said most Republican lawmakers would vote for the debt ceiling bill. A series of blockbuster data will be released this week, and the market will focus on the US non-farm payrolls report.

In addition, the adjusted MSCI China Index will take effect after hours on May 31; Hong Kong's new virtual asset policy will take effect on June 1; OPEC+ will hold a ministerial meeting, and the follow-up oil production plan is worth paying attention to.

According to Xinhua News Agency and CCTV news reports, the Chinese representative pointed out in his speech on the 27th on the issue of discharging Fukushima nuclear contaminated water into the sea that China resolutely opposes Japan's unilateral decision to discharge water contaminated by the Fukushima nuclear accident into the sea.

The State Administration of Cultural Heritage recently issued a notice on the list of famous artists who restricted the export of eight categories of works such as deceased calligraphy and painting after 1911. According to the circular, 41 modern masters such as Feng Zikai and Qi Baishi were not allowed to leave the country, and 158 representative works were not allowed to leave the country.

Stay tuned for progress on the debt ceiling

This week, the market will continue to pay attention to the progress of the US debt ceiling, the US debt impasse has made a breakthrough, the debt agreement has been tentatively agreed, and the draft will be submitted to the Senate and House of Representatives for voting on Wednesday.

On the evening of May 27, local time, US President Joe Biden and congressional Republican leader McCarthy reached an agreement in principle on raising the federal government's $31.4 trillion debt ceiling. Negotiators on both sides agreed to raise the U.S. federal debt ceiling for two years, while cutting and limiting some government spending for two years, and non-defense spending to remain close to flat for two years, with no mention of a post-2025 budget cap.

McCarthy said it expects the bill to be drafted and published on Sunday and to be submitted to the House and Senate for a vote on Wednesday. According to the process, members of the House will then have 72 hours to read the new legislation before submitting it to a vote, and continue to see if the Senate and House can pass the bill by the June 5 deadline.

McCarthy then said most Republican lawmakers would vote for the debt ceiling bill.

Some analysts said that in recent weeks, the debt crisis has hit risk sentiment in global financial markets hard. Over the weekend, U.S. negotiators reached a preliminary agreement to resolve the debt crisis, and global markets are expected to usher in a wave of rebound.

The US and UK markets were closed on Monday due to the holiday, and market liquidity is expected to be lighter.

Goulsby, the president of the Federal Reserve Bank of Chicago, was optimistic that both parties supported a preliminary deal to raise the U.S. debt ceiling, adding that failure to do so would be detrimental to the U.S. economy. Goulsby said it was "a bit dangerous" that the window for raising the debt ceiling was too narrow, noting that even expectations of default have affected the economy and financial markets.

JPMorgan analysts: Favor cash over stocks

Colmar, a partner and global strategist at MRB Partners, said the balance between stocks and bonds also depends on investors' perception of the federal funds equilibrium rate. The equilibrium federal funds rate is a short-term interest rate consistent with a long period of full employment and stable inflation.

Kolmar said current bond yields would be attractive if investors expect the federal funds equilibrium rate to remain around 2.5 percent, meaning the Fed's policy rate will be well below current levels in the long run. The federal funds rate currently stands at 5% to 5.25%.

However, Colmar doesn't think so. He said structural inflation has risen and both the equilibrium federal funds rate and inflation are likely to remain high. "Based on 10-year bonds, real yields probably won't be too high." Colmar noted by phone.

Colmar said he reduced his holdings of bonds, neutral holdings of stocks and increased his cash holdings.

Analysts at JPMorgan Chase and Colanovich, led by Kolanovich, also favor cash over stocks. "Even without considering the debt ceiling, we believe equities have low risk-reward returns given rising recession risks, overvaluations, high interest rates and tighter liquidity, and we prefer cash over equities, which yield about 5 percent," the analysts wrote in Thursday's note. ”

Analysts said they increased their cash allocation to their model portfolios by 2 percent this month by reducing their weights on stocks and corporate bonds by one percentage point each.

Earlier this year, Sekra, chief U.S. market strategist at Morningstar Research Services, said they were overweight value and growth stocks and underweight core stocks. For now, the company has shifted its market weight to growth stocks and retained its previous weighting on value and core stocks.

"We think small-cap stocks still have a lot of upside, especially after the leading economic indicators improve," Sekera said. ”

The market is focused on Friday's US jobs report

This week, investors will await the release of consumer confidence data on Tuesday, ADP private sector employment data on Wednesday, the ISM manufacturing activity index on Thursday, and most importantly, the US jobs report on Friday.

The market expects 188,000 new jobs to be created in May, down from 253,000 in the previous month. The unemployment rate will rise 0.1 percentage points to 3.5 percent, while wage growth will accelerate slightly. At present, the market expects the probability of the Fed raising interest rates at the June meeting to exceed 70%. Market participants said that if the non-farm payrolls exceed expectations this time, it will further strengthen the expectation of a rate hike in June.

On commodities, OPEC+ representatives said that OPEC+ is holding face-to-face meetings in Vienna on June 3-4, as planned. OPEC will meet on June 3, followed by OPEC+ on June 4 and the OPEC+ Joint Ministerial Monitoring Committee on June 4.

Earlier, Saudi Arabia shouted to threaten bears to "be careful." Saudi Arabia's energy minister, Abdel-Aziz bin Salman, told the Qatar Economic Forum that oil short-sellers should be "careful" and will continue to make them feel pain. The market expects OPEC+ to consider further production cuts at its June 4 meeting.

However, Russian Deputy Prime Minister Alexander Novak recently said that OPEC+ is unlikely to take new measures at this meeting after the decision to cut production last month.

Turkey's Supreme Electoral Council: Preliminary results show Erdogan winning the presidential election

On the evening of May 28, local time, Turkey's Supreme Election Council said that according to the preliminary results of the election, the incumbent President Recep Tayyip Erdogan won the second round of voting in the Turkish presidential election.

Turkey's Supreme Electoral Council said that so far, 99.59% of the votes have been counted, with incumbent President Recep Tayyip Erdogan receiving 51.91% of the votes, and Klıchda Oroğlu, a candidate of the "National Alliance" camp of six opposition parties, receiving 48.09% of the votes. According to this preliminary result, Erdogan won the election.

Erdogan has delivered a victory speech, and Klıchdar Oulu thanked voters who supported him.

The Supreme Electoral Council is expected to announce the official results of the elections on 1 June.

On May 14, local time, Turkey held the first round of voting in the presidential election, and none of the three presidential candidates received more than half of the votes. According to the Turkish constitution, the top two candidates with the most votes are required to compete in the second round. From 8 a.m. to 17 p.m. local time on May 28, Turkey held the second round of voting in the presidential election. This is the first time in the history of Turkey's presidential election that a second round of voting has been held.

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