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Market Overview
U.S. data rekindled inflation concerns, with the three major U.S. stock indexes falling by at least more than 1%, the S&P Nasdaq hitting its biggest drop in three months, and the Dow hitting its biggest daily decline in 13 months and its largest monthly decline in a year and a half, with U.S. stocks falling for the first time in half a year. Tesla fell more than 5%, leading the decline of tech giants. After the earnings report, Eli Lilly closed up 6%, Amazon rose 6% after hours, but the gains were given back sharply, and AMD fell more than 7% after hours; AI "demon stock" SMCI fell more than 10% after hours. The pan-European stock index hit the biggest monthly drop in half a year, British stocks temporarily bid farewell to historical highs, and the auto sector fell more than 4%.
After the release of labor costs, U.S. Treasuries turned lower, with the two-year Treasury yield quickly regaining 5% to hit a new high in more than five months, and the U.S. dollar index hitting a one-week high. The yen rebounded sharply and fell nearly 1% intraday to near 158 the next day.
U.S. oil hit a new one-month low, ending a three-month streak, and cloth oil rose for four consecutive months. Gold fell, gold futures fell more than 2% to a four-week low, and still rose for two consecutive months in April. London tin fell more than 4% to a three-week low, and still rose nearly 14% in April, London copper fell more than 1% to bid farewell to a two-year high, up nearly 13% in April, and London zinc rose 20% in April.
Bitcoin fell more than $5,000 intraday, falling below the $60,000 mark to hit a one-month low, and fell about 16% in April, the largest monthly decline in more than a year since FTX's bankruptcy.
In the Chinese market, during the U.S. stock market, the Chinese concept stock index fell more than 3% and stopped rising for six consecutive days, Station B fell more than 5%, Li Auto fell more than 2%, and NIO rose more than 2%, and the offshore yuan fell more than 100 points to 7.25 intraday. At the end of April, the Shanghai Composite Index held on to 3,100 points, northbound funds sold a net of 8.6 billion yuan, Hong Kong stock bitcoin ETFs rose collectively on the first day, and treasury bond futures closed sharply.
News
The Political Bureau of the CPC Central Committee held a meeting and decided to convene the Third Plenary Session of the 20th CPC Central Committee, with Xi Jinping presiding over the meeting.
China's official manufacturing PMI in April was 50.4, in the expansion range for two consecutive months, the non-manufacturing PMI continued to expand, and the prosperity level of the service industry declined. China's Caixin manufacturing PMI rose to 51.4 in April, the highest since March 2023.
Beijing optimizes and adjusts the housing purchase restriction policy: Beijing families with 2 suites can buy a new house outside the Fifth Ring Road. Tianjin: Residents with household registration in the city who purchase a single set of newly built commercial housing of more than 120 square meters in the six districts of the city will no longer be verified for the qualifications to purchase the house. Dalian introduced a new policy for the property market, giving subsidies to individuals who "sell the old and buy the new". CRIC Real Estate Research: The performance of the top 100 real estate companies in April decreased by 12.9% month-on-month and 44.9% year-on-year.
Huawei's revenue in the first quarter was 178.45 billion yuan, and the net profit attributable to the parent company was 19.65 billion yuan, a year-on-year increase of 564%. Huawei has released an internal personnel adjustment document, announcing that Yu Chengdong will step down as CEO of Huawei's Device BG.
The New Fed News Agency previews this week's FOMC meeting: doing nothing.
Amazon Cloud revenue accelerated for two consecutive quarters, with profits tripling in the first quarter, no dividends, and a significant narrowing of the increase after rising 6% after hours. AMD's first-quarter report and guidance were not bad, but the sales outlook for AI chips did not meet the market's high-profile expectations, and it fell 9% after hours. Competition was fierce, Supermicrocomputer's revenue fell short of expectations, and the quarterly guidance was better than expected, and the stock price plunged 15% after hours.
The market closes
U.S. stocks: The Dow fell 1.49%, the S&P 500 fell 1.57%, and the Nasdaq fell 2.04%.
European stocks: Europe's STOXX 600 index closed down 0.68%. Germany's DAX 30 index closed down 1.03%. France's CAC 40 index closed down 0.99%. Britain's FTSE 100 index closed down 0.04%.
A-shares: The Shanghai Composite Index fell 0.26%, the Shenzhen Component Index fell 0.9%, and the ChiNext Index fell 1.55%.
Bond market: The yield on the benchmark 10-year U.S. Treasury bond rose 7.45 basis points to a new daily high of 4.6881%, and has risen 48.57 basis points in April. The two-year Treasury yield rose about 6.7 basis points to a new daily high of 5.0434%, and rose 42.14 basis points in April.
Commodities: WTI crude oil futures for June delivery closed down $0.70, or 0.85%, at $81.93 a barrel, down 1.49% in April. Brent crude oil futures for June delivery closed down $0.54, or 0.61%, at $87.86 a barrel, up 0.43% in April. Spot gold fell 2% during the day to $2,288.43 an ounce. LME copper futures closed down 1.42%. In April, London zinc rose by nearly 20%, and London copper, London aluminum, London nickel, and London tin rose by at least about 11%.
Highlights
Domestic macro
The Political Bureau of the CPC Central Committee held a meeting and decided to convene the Third Plenary Session of the 20th CPC Central Committee, with Xi Jinping presiding over the meeting.
- The meeting pointed out that it is necessary to issue and make good use of ultra-long-term special treasury bonds as soon as possible, speed up the issuance and use of special bonds, maintain the necessary intensity of fiscal expenditure, and ensure that the "three guarantees" at the grassroots level are spent on time and in full. It is necessary to flexibly use policy tools such as interest rates and reserve requirement ratios to increase support for the real economy and reduce the cost of comprehensive social financing.
- The meeting emphasized that we should continue to adhere to the city-specific policies, consolidate the responsibilities of local governments, real estate enterprises and financial institutions, and do a good job in ensuring the delivery of housing to protect the legitimate rights and interests of buyers. It is necessary to combine the new changes in the supply and demand relationship of the real estate market and the new expectations of the people for high-quality housing, coordinate the study of policies and measures to digest the stock of real estate and optimize the incremental housing, and pay close attention to building a new model of real estate development to promote the high-quality development of real estate.
- The meeting emphasized that it is necessary to accelerate the breakthrough of key core technologies, coordinate the promotion of the upgrading of traditional industries, the growth of emerging industries, and the cultivation of future industries, and build an innovation chain, industrial chain, and supply chain in a larger scope. It is necessary to speed up the improvement of systems and mechanisms, break down administrative barriers, improve policy coordination, and promote the expansion of integration to deeper and broader fields.
- Soochow Macro believes that due to the announcement of the convening of the Third Plenary Session of the 20th CPC Central Committee, the Politburo meeting in April this year can be described as unusual. The "economic system reform as the traction" mentioned at the meeting as the core content means that the Third Plenary Session of the 20th CPC Central Committee will cover at least three key aspects: the reform of the scientific and technological system, the reform of the fiscal and taxation system, and the reform of the social system.
China's official manufacturing PMI was 50.4 in April, in the expansion range for two consecutive months. The expansion of production by manufacturing enterprises has accelerated, and the production index has hit the highest level since April 2023. The non-manufacturing PMI continued to expand, the prosperity level of the service industry declined, and the expansion of the construction industry accelerated slightly.
China's Caixin manufacturing PMI rose to 51.4 in April, the highest since March 2023. Overall, most of the sub-indices of Caixin China's manufacturing PMI rose. In April, the production index, new orders index, new export orders index, and raw material inventory index all rose in the expansion range.
Beijing has optimized and adjusted the housing purchase restriction policy: Beijing families with two houses can buy a new house outside the Fifth Ring Road, and adult single people with household registration in Beijing who already own one house in Beijing can also buy a house outside the Fifth Ring Road. Tianjin: Residents with household registration in the city who purchase a single set of newly built commercial housing of more than 120 square meters in the six districts of the city will no longer be verified for the qualifications to purchase the house. Dalian introduced a new policy for the property market, giving subsidies to individuals who "sell the old and buy the new".
CRIC Real Estate Research: The performance of the top 100 real estate companies in April decreased by 12.9% month-on-month and 44.9% year-on-year. It is predicted that in May, the total volume of transactions may continue to fluctuate at a low level, and the absolute volume will be the same as that in April or slightly decrease, but based on the high base of last year, the year-on-year decline will continue. From the perspective of energy levels, the overall popularity of the first line is better than that of the second and third lines, which is a high probability event, and the situation of "the strong will always be strong" is expected to continue.
The Shanghai and Shenzhen Stock Exchanges have revised and improved and officially issued relevant delisting rules. On the whole, the revision of the delisting criteria is to further highlight the deterrence of financial fraud, internal control failure and other chaos on the basis of the delisting reform in 2020, and improve the all-round and three-dimensional crackdown system against violations of laws and regulations.
A number of fund companies and custodians have received the Notice on Reporting the 2022 Market Average Stock Trading Commission Rate issued by the Asset Management Association, which clarifies that the average market stock trading commission rate in 2022 is 2.62/10,000.
Domestic companies
Huawei's revenue in the first quarter was 178.45 billion yuan, and the net profit attributable to the parent company was 19.65 billion yuan, a year-on-year increase of 564%.
Huawei has released an internal personnel adjustment document, announcing that Yu Chengdong will step down as CEO of Huawei's Device BG and will assume the position of Chairman of the Board of Directors of Huawei Device BG. He Gang, former Huawei Device BG and Chief Operating Officer, took over as CEO of Huawei Device BG.
After Yili's net profit exceeded 10 billion yuan, it threw a billion-level repurchase plan. In 2023, Yili, a leading dairy company, will have a revenue of 125.758 billion yuan, a year-on-year increase of 2.49%, and a net profit of 10.429 billion yuan, a year-on-year increase of 10.58%. Yili plans to distribute a year-end cash dividend of 1.2 yuan per share, and the dividend rate increased by 3.1 percentage points year-on-year to 73.3%, hitting a record high.
Overseas macro
The New Fed News Agency previews this week's FOMC meeting: doing nothing. Timiraos began his article by quoting the Chinese proverb "do nothing" as a way to summarize the Fed's latest approach to interest rates. The Fed is likely to emphasize that it is prepared to keep interest rates unchanged for longer than previously expected. Powell may say that the economic projections released in March are outdated. For the time being, it is unlikely that the Fed will make a more hawkish shift signaling a rate hike than a rate cut. Timiraos did not specify whether the Fed will formally announce a tapering of QT at this meeting.
The U.S. Treasury's short-term bond issuance has shrunk, and short-term bond investors who deposit large amounts of cash in their RRPs could cause the Fed to lose a clear understanding of liquidity and interfere with the path to QT withdrawal. Two years ago, the mismatch between supply and demand in short-term debt prompted investors to deposit trillions of dollars into the Fed's reverse repo facility, the RRP, to repatriate liquidity.
Labor costs in the U.S. accelerated in the first quarter, the largest increase in a year. The Fed's favored labor cost index has risen more than expected, indicating that the U.S. job market is still hot, and the expectation of interest rate cuts is bound to further converge.
The U.S. key home price index accelerated in February, rising 6.4% year-on-year, the fastest increase since 2022. All cities reported annual home price increases for the third month in a row, with four of them currently at all-time highs: San Diego, Los Angeles, Washington, D.C., and New York.
The effect of this round of "money printing machine" in the United States: M1 rose by 43%, the stock market rose by 26%, and CPI rose by 11%, but the real economy did not change much.
Eurozone GDP in the first quarter was 0.4% year-on-year, exceeding expected growth, and inflation stabilized. The eurozone is out of recession temporarily, and the GDP of the four major economies has rebounded in the first quarter, and the core inflation in the eurozone slightly exceeded expectations in April, with the service sector still the biggest driver.
Behind the record highs of gold: central bank retail investors are buying, and quarterly demand is the strongest since 2016. The World Gold Council noted that while demand for gold-backed ETFs is particularly weak in Europe, withdrawals from gold are likely to re-inflow once central banks start cutting interest rates. U.S. investors may need to wait for clearer signals of rate cuts before making a big return.
Overseas companies
Amazon Cloud revenue accelerated for two consecutive quarters, with profits tripling in the first quarter, no dividends, and a significant narrowing of the increase after rising 6% after hours. Amazon's first-quarter report is comprehensively good, some analysts say that its total revenue growth rate is the fastest in a year, profits have tripled, and AWS's operating profit margin has reached a new high, but the second-quarter revenue and operating profit guidance are slightly worse than expected, and the second-quarter revenue growth rate may be the slowest since December 2022, and it did not follow Meta and Google to announce the first dividend in history, which made Wall Street slightly disappointed. Amazon is the last big tech company that has yet to pay dividends to shareholders.
AMD's first-quarter report and guidance were not bad, but the sales outlook for AI chips did not meet the market's high-profile expectations, and it fell 9% after hours. AMD's first-quarter report was better than expected, revenue increased by 2% year-on-year, gross margin further expanded, data center revenue including AI chip sales, and client revenue closely linked to the improvement of the PC market surged by 80% year-on-year, and data center revenue reached a record high, but the revenue guidance for the second quarter "did not create excitement", and the annual sales forecast for AI accelerator chips was only $4 billion after the increase in sales expectations, far worse than rival Nvidia, and the stock price decline deepened after hours.
Competition was fierce, and the stock price plunged 15% after hours after the year with SMCI revenue falling short of expectations and better-than-expected guidance for the quarter.
Report: Apple targets Google employees to form an artificial intelligence team. Apple is making a low-key push for its AI business, poaching a large number of professionals from Google in recent years, and analysts expect Apple to present some of its research results at the WWDC conference in June.
"Weight loss miracle drug" is in short supply, and Eli Lilly raised its revenue guidance, rising 8% pre-market and closing up nearly 6%. Eli Lilly's blockbuster GLP-1 product, Zepbound, beat sales expectations in the first quarter of its launch, and the company raised its full-year revenue guidance by $2 billion.
Samsung's operating profit in the first quarter was 6.61 trillion won, soaring nearly tenfold year-on-year, and the AI boom drove chip prices to rebound.
Today's news preview
China's financial markets are closed for Labor Day.
The Fed's interest rate decision, Powell held a press conference.
The Federal Reserve unveils its quarterly refinancing plan for the next quarter.
Change in ADP employment in the United States in April.
JOLTS Job Vacancies in the United States for March.
US ISM manufacturing index for April.
Qualcomm, Pfizer, and Estee Lauder announced their earnings reports.
Changes in U.S. EIA crude oil inventories last week.
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