Economic Observer Reporter Liang Ji On November 2 local time, local time, the Federal Reserve Federal Reserve announced a hike of 75 basis points at the November interest rate meeting, increasing the target range of the federal benchmark interest rate to 3.75%-4%; this is also the fourth consecutive rate hike of the Federal Reserve 75bp, which meets market expectations. Since this round of interest rate hikes, the Federal Reserve has raised a total of 375bp. Notes at the
interest rate meeting show that the Fed reiterated that it will maintain a restrictive tightening monetary policy to bring inflation back to its target level of 2%, and is open to the reduction of interest rate hikes in the next two interest rate meetings. Powell said it is "premature" to consider suspending the rate hike process at the moment and "has a way to go." It is worth noting that the resolution of this meeting was passed unanimously, indicating that there are no differences within the Federal Reserve.
Previously, the market expected that the Federal Reserve would raise interest rates by 50bp in December after raising interest rates by 75bp in November, and gradually approaching the end of the interest rate hike. However, Fed Chairman Powell's statement at the press conference disappointed the market. The three major U.S. stock indexes rose first and then fell, and eventually fell across the board. The Nasdaq index fell by more than 3%.
CICC commented that Powell suggested that the pace of interest rate hikes may slow down, but the highs of interest rates will be higher, and the interest rate will stay at highs for longer. Such a statement means that the currency tightening is far from over and the interest rate turning point is far from here. The longer-lasting tightening will further tighten financial conditions, which will restrict the rebound of risky assets.
General Manager of Yihu Investment Yu Dingheng told Economic Observer that the Fed's fourth consecutive rate hike of 75 basis points and released hawkish signals showed that the Fed's struggle with inflation is far from over. In the end, the interest rate level will be higher than previous expectations, and US stocks fell sharply. A shares overall performed smoothly, and the Shanghai Composite Index continues to tug-of-war around 3,000 points. The expectation of interest rate hikes in has fully reflected, and the negative news has been implemented.
Rate hikes have not stopped
From November 1 to 2 local time, the Federal Reserve held a November interest rate meeting. The Federal Reserve said in a statement that the Federal Open Market Committee (FOMC) is committed to achieving the goal of maximizing employment and long-term inflation levels of 2%. To support these goals, the committee decided to increase the federal funds interest rate to the target range of 3.75%-4%.
html From 1 year to the present, the continued high inflation pressure has caused the Federal Reserve to raise interest rates continuously. In March, May, June, July, September and November 2022, the Federal Reserve raised interest rates by 25bp, 50bp, 75bp, 75bp, 75bp, 75bp and 75bp respectively. But U.S. inflation levels remained high.The September Consumer Price Index (CPI) released by the U.S. Department of Labor shows that the U.S. September CPI rose 8.2% year-on-year, higher than the market expectations of 8.1%, with the previous value of 8.3%; it rose 0.4% month-on-month, with the market expectations of 0.2%, with the previous value of 0.1%. Data shows that the maintaining of core inflation growth rate at a high level reflects the resilience of US consumption and the high wage growth rate. The personal consumption expenditure price index (PCE) released by the U.S. Department of Commerce also maintained a high level. Data shows that PCE in September rose 6.2% year-on-year, the same as last month; core PCE rose 5.1% year-on-year, with the previous value of 4.9%.
interest rate statement shows that "in deciding on the pace of future interest rate hikes, the committee will consider the cumulative effect of tightening monetary policy, the lag of the impact of policy on economic activity and inflation, and the economic and financial development status." The market interpreted it as the Fed will carefully consider the resonance effect of interest rate hikes, and US stocks rose for a while.
However, Powell's subsequent statement made the market's expectations disappoint. Powell said at a press conference that it is too early to consider stopping rate hikes. In addition, Powell also said that from the perspective of risk management, the Fed is considering failure to tighten enough and loosening policy too soon.
Powell said at a press conference that he would slow down the pace of interest rate hikes as soon as possible at the next meeting or after meeting, and said that a downward inflation rate hike is not a necessary condition for the Federal Reserve to slow down the rate hikes. The market interprets that the Fed has slowed down its interest rate hike path. However, Powell also believes that as the policy interest rate has risen to 4%, what is more important in the future than the speed of interest rate hikes is the height and durability of interest rate hikes.Given that employment and inflation data are still strong, interest rates will be higher in the future and interest rates will stay at highs for longer.
The Federal Reserve's interest rate meeting did not update the dot chart, but the "Feder Observation" tool on the Chicago Mercantile Exchange shows that the US federal benchmark interest rate will increase to 5%-5.25%. According to the previous dot chart, the end point of this round of interest rate hike cycle is around 4.6%.
CICC interpreted that slowing down interest rate hikes does not mean suspending interest rate hikes, and the currency tightening is far from over. Powell's above statement was interpreted by the market as a more hawkish signal. Although the Federal Reserve has plans to slow down the pace of interest rate hikes, the "front" for interest rate hikes has been extended. The shift of currency tightening from "working big and fast" to "running small steps" does not seem to be a good thing for risky assets.
The market fluctuated
On November 2, local time, US stocks rose after the Fed's resolution was issued, but Powell's statement at the press conference was interpreted by the market as "the hawk remains unchanged", and the three major U.S. stock indexes all fell. As of the close of November 2, the Dow Jones Industrial Average was 32,147.76 points, down 1.55%; the S&P 500 index was 3759.69 points, down 2.50%; the Nasdaq index was 10,534.80 points, down 3.36%. In terms of
stocks, the large technology stocks collectively fell. Apple (AAPL.O) fell 3.73%, Microsoft (MSFT.O) fell 3.54%, Google (GOOGL.O) fell 3.87%, Amazon (AMZN.O) fell 4.82%, and Facebook (META.O) fell 4.89%. Tesla (TSLA.O) fell 5.63%.
Popular Chinese stocks listed in , Alibaba (BABA .N) fell 1.76%, Pinduoduo (PDD.O) fell 0.52%, Bilibili (BILI.O) rose 0.33%, and Baidu (BIDU.O) fell 0.13%.
Under the pressure of continuous sharp interest rate hikes in the Federal Reserve, economic demand has gradually cooled down. In addition, the United States is currently in an inflation environment with a new high in nearly 40 years, and the pressure of rising prices is eroding corporate profits. Previously, the third quarter reports of many large financial institutions showed that the current profit declined year-on-year, and the performance of consumer retail giants was also eroded by inflation.
Guotai Junan overseas strategy team said that US stocks are not "cheap" at present, and the index valuation and risk premium are only at the lower average level. The static and dynamic price-to-earnings ratios of the S&P 500 both fell below the average since 2002 and were in the historical quarter of about 30%. The risk premium has been around the average level since 2002 since the March 2020 high. From the perspective of valuation and risk premium, the market has not fully priced the recession. Based on the current recession probability, the situation of US stocks not yet adjusted to the bottom, which also means that the current US stocks are still not "cheap".
was dragged down by the closing of US stocks overnight, and most of the Asia-Pacific stock indexes fell on November 3. As of the close, the Shanghai Composite Index was 2997.81 points, down 0.19%; the Shenzhen Component Index was 10840.06 points, down 0.34%; the ChiNext Index was 2376.06 points, up 0.01%.
net outflow of northbound funds was 4.565 billion yuan, and southbound funds were net purchases of 6.269 billion Hong Kong dollars. The Shanghai and Shenzhen stock markets had a total turnover of 886.535 billion yuan, of which the Shanghai stock market had a turnover of 370.653 billion yuan and the Shenzhen stock market had a turnover of 515.882 billion yuan; the volume was significantly reduced from the previous trading day's level of 1052.138 billion yuan.
Hong Kong stocks fell even more, with the three major stock indexes falling by more than 3%. As of the close, the Hang Seng Index was 15339.49 points, down 3.08%; the Hang Seng China Enterprise Index was 5170.51 points, down 3.45%; the hanseng technology index was 3035.39 points, down 3.84%. In terms of individual stocks, Tencent Holdings (0700.HK) fell 3.99%, Alibaba-SW (9988.HK) fell 6.53%, and Meituan -W (3690.HK) fell 3.54%.
Nikkei 225 index was 27663.39 points, down 0.06%; South Korea's comprehensive index was 2329.17 points, down 0.33%, and FTSE Singapore Straits index was 3103.77 points, down 1.19%. Rong Hao, partner of wealth management of
, told Economic Observer that the recent repeated pulls of the Shanghai Composite Index around 3,000 points have long-term certainty opportunities, but the short-term fluctuations will be large and will last for a period of time.First, due to the continued scattered epidemic in the domestic epidemic, although the production side is sufficient, consumption is weak, and it will take time to resume smooth circulation; second, the facts and expectations of the continuous support of various domestic policies will not change; third, the Fed rate hike boots have been put into use, the radical rate hike cycle is coming to an end, the marginal effect on global capital has weakened, and the time period with the greatest impact on A-share sentiment has basically passed.
European risk
1On November 2 local time, European Central Bank interest rate hike came into effect, and Europe's main refinancing rates, deposit convenience rates and marginal loan convenience rates rose to 2.00%, 1.50% and 2.25% respectively. On October 27, the European Central Bank held an monetary policy meeting and announced a 75bp rate hike, raising the benchmark interest rate to 1.25%. Previously, the European Central Bank had raised interest rates by 50bp and 75bp in July and September this year respectively, and has raised interest rates by 200bp so far.
The European Central Bank said that the primary goal of monetary policy is to reduce inflation and not be afraid of it because of the economic recession. European Central Bank President Lagarde said at a press conference after the November interest rate meeting that the euro zone economy will accelerate and slow down in the next two quarters, inflation is expected to continue to rise, and remain above the target of central bank for a long time, and the ECB is likely to continue raising interest rates at the next few meetings.
Great Wall Securities macro team believes that in this round of inflation reduction, the European Central Bank has adopted the practice of raising interest rates rapidly and reducing balance sheets slowly. By adjusting the minimum reserve ratio, refinancing operation interest rates, etc., to alleviate market liquidity risks and control the risk of interest rates rising too quickly. This policy requires the European Central Bank to maintain strong interest rate hikes, otherwise "slow balance sheet shrinkage" will affect the effect of interest rate hikes and it will be difficult for inflation to fall.
According to data from the European Union Statistics Office, the CPI of the Euro region in October rose 10.7% year-on-year, with the previous value of 10%, and the expected 10.3%; core CPI rose 5% year-on-year, with the previous value of 4.8%; from the perspective of sub-items, the energy sub-item is still the core source of pressure, and the contribution rate of to the inflation pressure in the euro zone reached 42%.
Chuan Finance Securities Overseas Strategy Team believes that since the outbreak of the Russian-Ukrainian conflict, the restrictions on Russian gas and Russian oil exports have caused a sharp rise in international energy prices, and inflation pressure in Europe has continued to rise. In October, European natural gas prices fell significantly. Considering that there are still many external uncertainties, there is still great uncertainty as to whether natural gas prices can continue to decline. At this stage, the European Central Bank's monetary policy has lagged behind the inflation situation. Considering that the European inflation value has not yet shown a downward trend, the European Central Bank's subsequent interest rate hikes are still under great pressure. Judging from the channels for interest rate hikes, the European Central Bank has a high possibility that it will maintain a tightening stance and continue to raise interest rates, and the extent of subsequent interest rate hikes will depend on key data such as the economy, employment and labor market.
In addition, the European manufacturing PMI has continued to decline since the beginning of this year. The initial value of the manufacturing PMI in the euro zone in October was 46.6, falling below the boom line for the fourth consecutive month. Considering that the European Central Bank's monetary policy shift is relatively small in the short term, the risk of the eurozone economy falling into recession has further increased due to factors such as energy shortage, the European debt crisis, and tightening of liquidity.
