Due to the boost of the AI wave and the strong earnings report, the US and Japanese stocks continued to strengthen in the first two trading days of the A-share market closure, with the S&P 500 index once rising above 5,000 points and the Nikkei 225 index once rising above 38,000 points.
In fact, we have been puzzled that the Fed has clearly denied the possibility of a rate cut in March at the February interest rate meeting, and the rate cut will not be until May at the earliest. However, the market does not seem to take Powell's statement to heart, and continues to be overly optimistic, with the resilience of the U.S. economy and the wealth effect brought about by the great bull market in the stock market, it seems that it is difficult for U.S. inflation to fall quickly. Finally, last night the market was slapped in the face by the US CPI in January, the US market suffered a rare double kill of stocks and bonds in months, and the market's expectations for the Fed's interest rate cut have also been sharply adjusted to move closer to the dot plot given by the Fed, and this round of the Fed and the market seems to be the Fed's victory.
Specifically, the report released by the U.S. Department of Labor last night showed that the U.S. CPI increased by 3.1% year-on-year in January, higher than the average market expectation of 2.9%, which disappointed people's hopes that the U.S. CPI data is expected to fall back to the "2 era". At the same time, the Fed's most important core CPI rose 3.9% year-on-year in January, higher than market expectations of 3.7%.
It can be seen that from June 2023, the US CPI has basically remained in the range of 3% to 4%, and has never fallen below 3%, and the US core CPI has also bid farewell to the previous rapid downward trend, and the year-on-year growth rate in January was flat in December last year, indicating that US inflation may have entered a new sticky stage.
After the release of the data, the market quickly adjusted its expectations for a subsequent Fed rate cut, and U.S. short-term interest rate futures traders have bet that the Fed will not cut rates before June. CME Group's FedWatch tool shows that the market is now pricing in the June meeting as the most likely first rate cut by the Fed, with a 74.4% probability of a rate cut of at least 25 basis points at that meeting, while the probability of a rate cut at the May meeting is expected to fall to 36.1% from 60.7% on Monday. The number of rate cuts has increased from the previous expectation of 6 rate cuts to the latest forecast of fewer than 4 rate cuts for the whole year last night.
Due to the sharp adjustment of the market's expectations for the Fed's interest rate cut, the dollar index and the yield of the US 10 bonds soared last night, the US dollar index once approached the 105 mark, and the US 10 bond yield once rose above the 4.3% mark.
The U.S. market finally ushered in a double kill of stocks and bonds, and the surge in Treasury yields caused the bond market to plummet, with the Dow Jones falling 1.35% and the Nasdaq falling 1.80%. At the same time, gold also plummeted, and the international gold price once fell below $2,000 per ounce.
The poor performance of U.S. stocks last night also dragged down the Asia-Pacific stock market today, which basically fell across the board. However, although Hong Kong stocks fell sharply at the open, they exploded intraday.
Judging from our past experience, Hong Kong stocks play more of a role in following the crowd during the A-share market break, especially after the decline of Hong Kong stocks in the past two years, they basically can't rise U.S. stocks, and they fall more than U.S. stocks, and the yield of U.S. 10 bonds has a great impact on Hong Kong stocks. Therefore, today's strength of Hong Kong stocks against the market can be said to be weak and not weak.
We believe there are two main reasons for this:
First, when the external market continues to hit new highs, A-shares and Hong Kong stocks have ushered in an accelerated plunge, although it is a bit ironic to say that "the fall releases risks", but the plunge in January did further release the risks. The valuation of Hong Kong stocks is at a record low, and buybacks have hit a new high, which is a good choice for left-hand funds.
Second, social finance ushered in a good start in January, with certain optimistic marginal changes in both total volume and structure. In terms of aggregate volume, China's increase in the scale of social financing and credit growth in January both exceeded market expectations and soared to record highs. From a structural point of view, in the increase in credit in January, the residential side increased more year-on-year, and the enterprise side increased less year-on-year. Specifically, household loans increased by 980.1 billion yuan, an increase of about 722.9 billion yuan year-on-year, of which short-term loans increased by 352.8 billion yuan and medium and long-term loans increased by 627.2 billion yuan, an increase of about 318.7 billion yuan and 404.1 billion yuan respectively year-on-year.
M1 has a high correlation with the stock market, with the growth rate of M1 rising sharply to 5.9% in January (the previous value of 1.3%), and the scissor gap between M1 and M2 growth rates has converged sharply. Although this is due to the low base and seasonal factors last year, it also shows that the economy is not as pessimistic as the market expects, which is related to the recent liberalization of real estate policies and the improvement of medium and long-term loans for real estate sales residents.
At the close, the Hong Kong Hang Seng Index rose 0.84%. The Hang Seng Tech Index rose 2.26%. In terms of sub-sectors, the three major sectors of consumption, technology and finance led the gains, with China Merchants Bank rising more than 5%.
Risk Warning:
The stock market is risky, investment needs to be cautious, this article does not constitute investment advice, readers need to think independently