International financial markets already knew: February 1

【Information Guide】

•SAFE updated and released the Catalogue of Major Laws and Regulations on Foreign Exchange Administration in Force

• The IMF and Japan held discussions on exchange rate issues

• The Federal Reserve keeps interest rates unchanged and continues to shrink its balance sheet as planned

• Powell: The policy rate may have peaked

U.S. ADP payrolls rose less than expected in January

【Market Information】

•The State Administration of Foreign Exchange (SAFE) has updated and released the Catalogue of Major Laws and Regulations on Foreign Exchange Administration in Force (as of December 31, 2023). The newly included documents in the Catalogue mainly involve cross-border trade and investment facilitation, digital services for capital account business, etc., all of which belong to improving the quality and efficiency of foreign exchange management services for the real economy.

• The International Monetary Fund (IMF) holds discussions with Japan on exchange rate issues. The Japanese authorities have pledged to commit to a flexible exchange rate that acts as a shock absorber.

•At 3 a.m. Beijing time on February 1, the Federal Reserve announced its latest interest rate decision, and the target range for the federal funds rate remained unchanged at 5.25-5.5%, continuing to shrink its balance sheet as previously planned. According to the policy statement, the Fed noted a steady expansion in economic activity, a slowdown in job growth but still strong, and a low unemployment rate. Inflation has slowed over the past year, but remains elevated, and inflation risks need to remain highly monitored, although risks to achieving the employment and inflation targets are becoming more balanced.

• Fed Chair Jerome Powell said at a press conference that the economy is making good progress, inflation has eased, and the policy rate has clearly moved into restrictive territory. But at the same time, the labor market remains tight, inflation is still above target, and it is hoped that inflation data will continue to decline in the second half of the year, and evidence of a sustained decline in inflation is needed. Powell acknowledged that policy rates may have peaked and that it might be appropriate to start cutting rates sometime this year.

• The U.S. Treasury Department raises the size of notional auctions of Treasury bonds other than 20-year U.S. Treasuries. The U.S. Treasury will auction $54 billion of 3-year Treasuries on Feb. 6, $42 billion of 10-year Treasuries on Feb. 7, and $25 billion of 30-year Treasuries on Feb. 8.

• ECB Vice President Guindos said the outlook for the eurozone economy has deteriorated since December last year and that economic growth is likely to be weaker this year than the ECB predicts. Guindos doesn't see a risk that the ECB will cut rates too late.

The Bank of Japan released a summary of the opinions of the members of the deliberation committee of the January monetary policy meeting, showing that one member believes that it is necessary to continue to patiently implement easing measures, one member believes that the end of negative interest rate policy will be considered if the inflation target is about to be achieved, and one member believes that the conditions for ending negative interest rate policy are increasing.

• Kuwait and Saudi Arabia issued a joint statement saying that the trade volume and bilateral investment volume of the two sides have increased significantly, and the two sides will strengthen cooperation in various fields such as industry, communications, logistics and finance in line with Saudi Arabia's Vision 2030 and Kuwait's Vision 2035.

Brazil's central bank cut its benchmark interest rate by 50 basis points to 11.25%, in line with market expectations.

Chile's central bank cut its benchmark interest rate by 100 basis points to 7.25%, in line with market expectations.

Colombia's central bank cut its policy rate to 12.75% from 13%.

Indonesia will use local currency settlements in cross-border trade and investment with India and Saudi Arabia, said Bank Indonesia Governor Perry Wajiyo said.

• US ADP payrolls rose by 107,000 in January, less than the expected 150,000, compared with a revised downward revision to 158,000 in December. This is in line with the gradual cooling of the labor market.

• Japan's exports of agricultural, forestry and fishery products and food products increased by 2.9% year-on-year to 1.4547 trillion yen in 2023, hitting a record high for 11 consecutive years. Among them, exports to Chinese mainland fell sharply by 14.6% to 237.6 billion yen, the first decline since 2011, and exports to the United States increased by 6.4% to 206.2 billion yen.

【Global Market Dynamics】

The Dow Jones fell 0.82% to 38,150.3, the S&P 500 fell 1.61% to 4,845.65, and the Nasdaq fell 2.23% to 15,164.01.

• COMEX gold futures rose 0.33% to $2,057.7, and COMEX silver futures fell 0.71% to $23.06.

• The U.S. oil March contract fell 2.53% to $75.85 a barrel. Brent oil April contract fell 2.39% to $80.53 a barrel.

The yield on the 5-year Treasury note fell 13.3 basis points to 3.841%, the yield on the 10-year Treasury note fell 12 basis points to 3.917%, and the yield on the 30-year Treasury note fell 8.2 basis points to 4.171%.

The U.S. dollar index rose 0.12% to 103.52, with non-US currencies diverging, with EURUSD down 0.25% at 1.0818, GBPUSD down 0.12% at 1.2685, AUDUSD down 0.53% at 0.6567, USDJPY down 0.45% at 146.94 and USDCHF down 0.05% at 0.8613.

On January 31, the central parity of the RMB against the US dollar was raised by 16 points to 7.1039, and the onshore RMB officially closed at 7.1795 against the US dollar at 16:30 Beijing time, down 22 points from the official closing price of the previous trading day. The offshore yuan closed at 7.1695 at 03:00 Beijing time on February 1, up 95 points from the previous trading day's overnight close, and the offshore yuan closed at 7.1872 against the US dollar at 05:59 Beijing time on February 1, down 3 points from the end of the previous trading day.

【Intraday focus】

•09:45 China's Caixin Manufacturing PMI (Jan).

16:50 French manufacturing PMI final (January).

16:55 Germany's final manufacturing PMI (January).

17:00 Eurozone manufacturing PMI final value for January

17:30 UK manufacturing PMI for January

•18:00 Eurozone preliminary CPI YoY for January

18:00 Eurozone CPI for January

18:00 Eurozone unemployment rate for December

•20:00 The Bank of England announces its interest rate decision and monetary policy report

•20:30 U.S. Challenger layoffs in January

• 21:30 U.S. initial jobless claims for the week ending January 27

•21:45 ECB President Christine Lagarde speaks

•22:45 US Markit manufacturing PMI final (January).

•23:00 US ISM manufacturing PMI (January).

•23:00 U.S. construction spending in December

Editor: Ma Mengwei

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