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Last night, two major news came, and the global financial market was once again surging.
State Council Tariff Tax Commission issued Announcement , deciding to impose tariffs on approximately US$75 billion imported goods originating in the United States. Fed Powell's speech at the of the 2nd Annual Meeting of the Global Central Bank of Jackson Hall avoided talking about monetary policy trends.
Affected by this, U.S. stocks plummeted to . The three major stock indexes closed down hard, with the Dow falling more than 600 points, a drop of 2.37%, the Nasdaq fell 3%, and the S&P 500 fell 2.59%.
European and American stocks and bonds double-killing, gold soared again
Risk assets and safe-haven assets have once again staged a style switch.
htmlOn August 23, the US stock market plunged intraday. As of the close, the three major indexes fell by more than 2%, of which the Dow Jones Industrial Average fell by more than 600 points, a drop of 2.37%, and fell by more than 700 points during the session, losing the 26,000 point mark; the Nasdaq index fell by 3%, and the S&P 500 fell by 2.59%, losing the 2,900 point mark.
Source: Wind
European stock markets also felt the shock wave, and most major stock indexes plunged twice during the session. As of the close, the European Stoke 50 Index, the German DAX30 Index, the French CAC40 Index, and the Italian FTSE MIB Index all fell by more than 1%.
Source: Yingwei Finance
International oil prices also fell sharply. As of press time, U.S. oil fell 2.66% to $53.88/barrel, and fell 2.5% during the session to $53.24/barrel, a drop of more than 3.5%; Bergaso fell 1.56% to $58.57/barrel, and fell 2.5% during the session to $57.89/barrel, a drop of more than 2.5%.
The dollar index, which measures the dollar against six major currencies, fell sharply during the session, non-US currencies rose one after another, and currencies such as the euro, yen, and pound all appreciated significantly against the US dollar.
Source: Bloomberg
At the same time, risk aversion sentiment has heated up, and a large amount of funds have poured into safe-haven assets such as treasury bonds and precious metals.
US bond market has become more crowded, resulting in a sharp decline in yields. As of press time, the yield on the US long-term and short-term Treasury bonds fell sharply across the board. Among them, the yields of two-year, three-year, five-year, seven-year and benchmark treasury bonds all fell by more than 4%.
Source: Yingwei Finance
Treasury bonds of major European countries have also become the target of funds, resulting in their general decline in yields. The yields of 10-year government bonds in various countries have fallen one after another, while the yields of 10-year government bonds in Germany and France are hovering in the negative range.
Source: Yingwei Finance
Gold soared again, the price of the main contract of COMEX gold futures on the New York Mercantile Exchange rose sharply during the session, and once reached the $1,540 per ounce mark. As of press time, the New York gold futures price rose by $28.4 per ounce to $1,536.9. At the same time, silver futures prices have also achieved a significant increase.
Source: Wind
Wind shows that the world's largest gold ETF-SPDR GoldTrust's position increased by 4.99 tons compared with the previous day, an increase of 0.58%, and the current position is 859.83 tons. Standard Chartered Bank believes that the Federal Reserve will further cut interest rates in September and December, and gold prices are expected to gain support again as interest rate levels fall and geopolitical risks surge.
China decided to impose tariffs on
about US$75 billion imported goods originating from the United States
On August 15, 2019, the U.S. government announced that it would impose 10% tariffs on US$30 billion imported goods from China, and will be implemented in two batches from September 1 and December 15, 2019. The US measures have led to the continued escalation of Sino-US economic and trade frictions, greatly harming the interests of China, the United States and other countries, and seriously threatening the multilateral trading system and free trade principles.
China is forced to take countermeasures against the above measures of the United States. According to the " Customs Law of the People's Republic of China ", "Foreign Trade Law of the People's Republic of China", "Import and Export Tariff Regulations of the People's Republic of China" and other laws and regulations and the basic principles of international law of , with the approval of of the State Council, the Tariff Tax Committee decided to impose 10% and 5% tariffs on 5,078 tax items and approximately US$75 billion of goods originating from the United States, and will be implemented in two batches from 12:01 on September 1, 2019 and 12:01 on December 15.
In order to defend the multilateral trading system and defend its own legitimate rights and interests, in accordance with the "Customs Law of the People's Republic of China", "Foreign Trade Law of the People's Republic of China", "Import and Export Tariff Regulations of the People's Republic of China" and other laws and regulations and basic principles of international law, with the approval of of the State Council, the Tariff Tax Committee decided that from 12:01 on December 15, 2019, 25% and 5% tariffs will be imposed on automobiles and parts originating from the United States.
Source: State Council Tariff Tax Commission official website
Powell did not raise interest rate cuts but promised to take appropriate action
Fed Powell's speech at Jackson Hall Global Central Bank Annual Meeting did not specifically explain the future direction of monetary policy and subsequent interest rate cuts, but promised that the Fed would "take appropriate action to maintain economic expansion."
He said that the U.S. economy continues to perform well overall, driven by consumer spending. The interest rate cut in July eased the previously tense financial environment and supported a rebound in employment and inflation. The Fed is completing its dual mission of full employment and price stability. The challenge now is what monetary policy to maintain economic growth, make the strong job market more profitable, and keep inflation at around 2%.
He also mentioned that the Federal Reserve is now a "wading across the river", and for the current environment, there is no historical experience to refer to. It also pointed out that " monetary policy tool is a powerful tool in promoting consumption, supporting investment, and boosting market confidence, but it cannot provide a rule manual on international trade issues."
He stressed that the US economic expansion cycle has lasted for ten years, and during which the economic outline has undergone a huge change, the Federal Reserve is looking for ways to deal with these changes. "We are studying the monetary policy tools used in normal periods and crisis periods in history, and are also considering whether the policy toolbox should be expanded."
Overall, Powell's depiction of the economic background color is still relatively optimistic. He pointed out that although there are many risks and challenges, the economy continues to perform well overall.
However, an important economic data in the United States has not seemed so optimistic recently. The initial value of the US Markit manufacturing PMI fell to 49.9 in August, the first time since September 2009, falling below the 50 boom and bust line, lower than expected and previous values. Some analysts say this is also the latest sign that trade frictions may exacerbate the slowdown in the US economy.
Powell's commitment to "take appropriate action" has allowed the market to see hope for the Federal Reserve to cut interest rates further. After his speech was released, the three major U.S. stock indexes rose and turned red at the beginning of the session. But the news that the trade tensions have escalated again has caused the three major indexes to plummet to .
Before the Jackson Hole annual meeting was held, Trump repeatedly called out to Powell, blaming the Fed for "ineffective interest rate cuts." This time, Trump continued his "daily confrontation" with the Fed and said on social media, "The Fed did nothing like before!" "Our dollar is very strong, but the Fed is very weak."
According to the Washington Post, the White House is discussing various plans to stimulate U.S. economic growth before the 2020 election, including the implementation of the Federal Reserve's chairman rotation mechanism. Some market insiders are worried that Trump's continuous daily pressure on the Fed and seeking to make changes in policy mechanisms will affect the independence of the Fed's monetary policy.
But Forbes' article pointed out that what affected the direction of the Fed's policy may not be Trump's remarks, but his "impulsive actions" - Trump's continuous escalation of trade frictions has caused harm to the global economy and in turn dragged down the US economy, and the weakness of the US economy may become the reason for the Fed to cut interest rates.
CME’s “Feder Observation” tool shows that after Powell’s speech, the market rekindled the expectation of “the Federal Reserve’s interest rate cut by 50 basis points in September”. On the eve of Jackson Hole annual meeting , the expectation once dropped to zero.
Source: CME
Editor: Zhang Nan Song Zhaoqing
