Following Feder , the Bank of England raised interest rates by 275 basis points, and the market storm again. The US 2/10-year Treasury bond yield set a historical record inverted. What does this mean?
German Chancellor Scholz Visiting China today The list of accompanying CEOs highlights cooperation
German Chancellor Scholz started his first visit to China on November 4, and the accompanying German economic delegation also became the focus of international attention. At a time when there are some noises in China-Germany economic and trade relations, this visit undoubtedly conveys the importance that German industry and commerce attach to the Chinese market. The business leaders who visited China with Scholz this time came from multiple industries, and the companies they represented had revenues of tens of billions of euros in China every year. Relevant experts said that these representative German executives visited China with Scholz, proving that any " centrifugal force " that wants to alienate China-Germany economic and trade relations is not as great as the huge attraction brought by China's economic development.
Bank of England raises interest rates by 75 basis points, the rate hike reaches the largest in 1989
On November 3, the Bank of England released an interest rate resolution showing that the Bank of England raised interest rates by 75 basis points, raising the policy interest rate from 2.25% to 3%, in line with expectations. The rate hike this time set a record for the UK's largest record since 1989, with the rate level of rising to a 14-year high.
Bank of England said the scale of interest rate hikes in November would "reduce the risk of a longer and costly policy tightening later." Maintaining the market path used in the forecast (interest rates peak at about 5.25% next year) will result in a 3% drop in GDP and ultimately pulling inflation down to zero. The prospect of maintaining interest rates at the current 3% level suggests that the recession will last shorter and shallower, and inflation is expected to fall back to its target level in two years. It is expected that if the interest rate remains at 3%, the CPI in the fourth quarter of 2024 will be 2.2%, and the CPI in the fourth quarter of 2025 will be 0.8%; if calculated at market interest rates, the CPI in the fourth quarter of 2024 will be 1.43%, and the CPI in the fourth quarter of 2025 will be 0.02%. Inflation is expected to peak around 11% in the fourth quarter of this year. If inflationary pressures continue, or more rate hikes are needed, it may even be "strong".
After the Bank of England's resolution was announced, the pound sterling fell rapidly against the US dollar. US stocks fell below 1.1160 before the session, about 2% during the day. The decline of US stocks narrowed in the early trading, and the decline expanded in the afternoon. By the end of the US stock market, it hovered at the 1.1155 line, falling more than 2% during the day, at the low level since October 21.
40 most serious inversion! The U.S. 2/10-year Treasury yield inverted hit a record high
The number of first-time unemployment claims in the United States last week was still close to a historical low, and the high fever in the labor market will strengthen the Fed's confidence in raising interest rates to curb inflation. Market pricing for interest rate swap contracts showed traders expected terminal interest rates to rise to 5.2% from below 5.0% on Wednesday.
Yesterday, a key indicator of the US Treasury yield curve, the 2/10-year yield inversion hit a record high, and the 2-year US bond yield was 58.6 basis points higher than the 10-year US bond yield.
US 2/10-year Treasury yield interest rate spread fell by more than 5.8 basis points, setting a record low of -58.585 basis points.
This level is higher than the 58 basis point spread on August 10 after the release of U.S. inflation data in July this year, when it hit its highest level since the early 1980s. Since mid-August, the inverted interest rate spread level has usually fluctuated within the range of 58 basis points inverted to 14 basis points inverted, and the flattening yield curve is mainly due to the increase in the 2-year U.S. bond interest rate exceeding the 10-year U.S. bond interest rate.
The yield on the two-year U.S. Treasury once soared to 5.134% during the session, and now fell to around 4.7%; the 10-year U.S. Treasury yield is currently hovering around 4.13%; the 2/10-year U.S. Treasury yield spread fell by more than 5.6 basis points, at -57.955 basis points, hovering around the historical low of -58.585 basis points that New York fell in the afternoon.
Market analysis said that the current inverted U.S. Treasury yields have expanded rapidly, mainly because the Federal Reserve's interest rate hike continues to cause short-term interest rates to rise rapidly, but the upward magnitude of long-term interest rates is still suppressed by weaker economic expectations. The deep inversion reflects that the US economy is weakening and to a certain extent indicates that there is a risk of recession in the next one or two years.
The three major U.S. stock indexes closed down collectively, with the Dow Jones Industrial Average falling 0.46%, the Nasdaq fell 1.73%, and the S&P 500 index falling 1.06%. Most of the large technology stocks fell, while most of the popular Chinese stocks rose.
Nasdaq Golden Dragon China Index closed up 3.22% at 5024.96 points, approaching the closing level of 5221.93 points on October 21. component stock Huadi International's closing price rose 242.80%, TROO rose more than 11.2%, Genxi Bio rose more than 10.6%, Happy Auto rose more than 10.2%, Good Future rose more than 7.4%, and Pinduoduo rose about 6.3% - leading the component stocks of Nasdaq 100 index .
Domestic futures generally closed higher at night, with PTA and staple fiber leading the way after rising by more than 2%.
For the foreign market, WTI crude oil futures closed down 2.03% to US$88.17 per barrel; Brent crude oil futures closed down 1.55% to US$94.67 per barrel. COMEX December gold futures settlement price closed down 1.2% at $1,630.90 per ounce.
It is worth noting that ICE cotton rose 4 cents or 5.1% in the trading session, hitting daily limit , at 83 cents per pound.
US non-farm data may be relatively strong, and it is difficult to "softify" the hawkish stance of the Federal Reserve
On Wednesday night, the Federal Reserve sent a mixed signal of dovish and hawks that the pace of interest rate hikes will shrink, but the interest rate hikes will last longer and the end rate will be higher.
dovish information comes from interest rate resolution: this policy statement added a new sentence: "In the future, the pace of deciding to increase the target range, the committee will consider the accumulated tightening of monetary policy , the lag of monetary policy affecting economic activity and inflation, as well as economic and financial development." This shows that the Fed acknowledges a lag in interest rate hikes, suggesting that the pace of interest rate hikes may be narrowed to observe policy effectiveness.
And hawkish information comes from Powell's statement: Powell said at a press conference that a series of data released since the last meeting showed that the final interest rate level will be higher than previous expectations, and the suspension is not something we are considering. This means that the final interest rate will be higher than 4.6% (the dot chart of the September interest rate meeting shows that the end rate is 4.6%), and the duration of the interest rate hike will also exceed market expectations.
In the view of Zheng Jianxin, a macro analyst at China Trade Futures, Powell's speech poured cold water on the market's optimistic expectations, and it is too early to talk about the Fed's policy.
"Although the problem of rate hikes has been alleviated, it can be seen from Powell's speech that the height of the rate hike and the length of the tightening time are still possible beyond expectations." Dai Chaosheng, a macro foreign exchange analyst at the Nanhua Futures Research Institute, said that at the economic level, Powell still believes that the employment market remains strong and there is still a long way to go to restore the balance of supply and demand. The viewpoint on soft landings has softened, and Powell admits it is difficult, and the road is getting narrower and narrower.
Currently, the UK is facing pressure of soaring inflation and recession. After the Federal Reserve's interest rate hike boots are landed, the Bank of England's November interest rate meeting resolution has also attracted much attention.
"As the EU follows the United States to impose multiple rounds of sanctions on Russia, the backlash effect is becoming more and more prominent; energy supply is short of energy, inflation soars, business operations and people's living and production costs are high, and the economy is further under pressure. Judging from the high inflation shock caused by the energy crisis , combined with the results of the European Central Bank meeting and the speech of Lagarde , the ECB will continue to raise interest rates sharply."
In this regard, Dai Chaosheng also believes that since the inflation in September rose by 10.1% year-on-year compared with , consistent with July, and returning to the highest level in 40 years, the Bank of England must raise interest rates sharply.
"The UK's CPI rose to 10.1% in September, a record high in 40 years, and energy prices ushered in an upper limit adjustment in October. The continued rise in energy prices made the October inflation data even worse." In Zheng Jianxin's view, the inflation pressure faced by the UK is greater than that of the United States, which means that the Bank of England has limited choices and can only maintain a high-intensity rate hike rhythm.
It is worth mentioning that in addition to the Federal Reserve's interest rate hike, the US non-farm data is coming again this Friday. Does Powell's speech mean that non-agricultural data will improve?
"Generally speaking, ADP ('small non-farm') data can make forward-looking judgments on non-farm data, and better-than-expected ADP data indicates that non-farm data may be stronger this month."Zheng Jianxin said that various data such as Vacancy and Labor Epidemic Survey (JOLTS), ADP, etc. show that the US labor market is still strong, and wages are facing the risk of continued upward trend, which means that the Federal Reserve will find it difficult to "soften" its hawkish stance in the short term.
Regarding the upcoming October non-agricultural data, Shi Jialiang believes that the US non-agricultural employment population after the October season adjustment has fallen slightly compared with the previous value of 263,000, but it has fallen The range is relatively limited, and the performance of the employment market is still relatively strong, providing greater room for the Federal Reserve to accelerate the tightening of monetary policy.
In his opinion, Powell's speech after the November interest rate meeting was arrogance, which does not indicate that the non-agricultural data released on November 4 will improve. "The performance of non-agricultural data will affect the path of the Federal Reserve's monetary policy, but the adjustment of the Federal Reserve's monetary policy will not affect the performance of non-agricultural data in the short term. Tightening of policy will curb employment performance in the medium and long term. "Shi Jialiang said.
"Before this rate hike, the market generally expects the Federal Reserve to slow down the pace of interest rate hikes. However, Powell's speech at this meeting showed that the duration and end rate of the Federal Reserve's interest rate hikes will exceed the previous expected value, which means that the market will react again to correct expectations, and market volatility may increase again. "Zheng Jianxin said.
oil-chemical sector has obvious differentiation LPG may enter the end
Recently, Brent crude oil fluctuated between US$90-100 per barrel, the oil-chemical sector has differentiated, fuel oil follows the fluctuation of oil price range, asphalt performs weakly, and liquefied gas stands out again, trading center of gravity continues to move upward.
"The oil-chemical sector has performed relatively differently recently. The reason is that under the background of terminal demand negative feedback interpretation, the different situation on the supply side and the different position of the industrial chain bring differentiation of various trends. Overall, the stronger the variety with a significant shrinkage on the supply side, the stronger the upstream variety. "Zhang Zhengze, an analyst at the Guohailiang Times Cargo Research Institute, said that for example, asphalt and LPG in the sector, the performance gap between the two varieties is large, and the key is that the supply side is different. "Although the spot comprehensive profit has declined, the device has not reduced production significantly, and the supply side pressure is still large. The news of LPG continues to ferment due to the reduction in Iran's shipment in November, the market supply tightens. ”章正泽称。
“液化气外盘近期涨势如虹，一个月的时间上涨了100美元/吨左右。 The main reason is that the sharp reduction of OPEC+ production in November boosted market expectations. "He Bei, an consultant for East Asia futures investment, said that the recent strike in Iran and the construction of oil and gas field installations have led to a decrease in exports, the congestion of Panama Canal affects transportation, and the increase in spot bidding for customers in China, Japan, South Korea and India has led to an improvement in the supply and demand of liquefied gas in foreign disks.
According to He Bei, the price of Saudi Aramco's CP propane butane contract in November continued to rise. Among them, propane rose by US$20/ton to US$610/ton compared with the previous month; butane rose by US$50/ton to US$610/ton compared with the previous month. The landing costs of renminbi are both around RMB 5,500/ton. "The freight costs of liquefied gas have also increased significantly recently, causing the import costs to continue to increase. Support the domestic market. "
In this regard, Ai Bo, manager of the gas business department of Longzhong Information, also said that liquefied gas is different from other varieties. Liquefied gas is seasonal. In the traditional peak season of demand in winter, now with the support of chemical demand, the volume and price have risen. International oil prices continue to maintain high oscillations, driving international LPG prices to rise. From the perspective of fundamental , it also supports the rise of LPG.
According to Ai Bo, starting from late October, the return of PDH and cracking profits has promoted international spot stocks The transaction volume increased, and Chinese, Japanese and Korean buyers returned to the market, giving market confidence. It is understood that the spot transaction price of LPG rose from the October low point CP+20 to around CP+75, and the transaction price of paper goods rose by US$100/ton in just 12 days.
"In the long term, international foreign transactions are still active, special production sources are insufficient, Saudi Aramco supplies spot also decreased, international VLGC freight continues to rise and rise, and import costs in December are still in an upward trend. "Aibo said that due to this, the prices in the domestic markets of East China and South China will continue to move up, and Shandong will rise slowly due to the mask incident in the short term.
"In the short term, the LPG market still has some upward action." In He Bei's view, crude oil rebounded, OPEC+ began to reduce production in November, and Iran's export problems have not yet been resolved, etc., continue to support prices. And as the temperature drops, the demand for traditional combustion will increase.
At the same time, there are certain hidden concerns in the LPG market. The latest US EIA inventory data shows that the accumulation of US propane inventory has accelerated, and US supply has always been at a high level. If demand cannot be maintained, the pressure on the supply side will appear. Domestic, the operating rate of PDH has increased to about 80%, and the expected positive effects have been basically fulfilled. With the rapid decline in PDH profits recently, there is limited room for the device operation rate to continue to increase. In addition, combustion demand has been affected by the epidemic and the recovery speed may be lower than expected.
In this regard, Nanhua Futures Energy Chemical analyst Liu Shunchang also said that with the recent continuous rise in the foreign market propane price, the PDH profit that drove the recovery of PDH operating rate in the early stage has turned from positive to negative, falling sharply to around -1,000 yuan/ton.
According to Liu Shunchang, the relationship between PDH profit and operating rate has shown this characteristic since the beginning of this year, that is, PDH profit leads the operating rate for about one month. "Before the 11th National Day, PDH profit peaked and fell, it is estimated that the PDH operating rate will likely gradually decline in November, which means that the chemical demand for propane is facing a decline." Liu Shunchang believes that the rise in LPG futures is coming to an end.
The current crude oil market range is fluctuating, and the supply and demand of oil chemical varieties themselves have become the focus of market trading. The fluctuations in the crude oil market may increase in the future.
"The key to the trend of the oil and chemical sector is the unilateral trend of crude oil and the trend judgment of the cracking price difference of refined oil, especially diesel." Zhang Zhengze said that the unilateral trend of crude oil depends on the rhythm and actual effect of OPEC+ production cuts. From the demand side, if interest rate hikes continue to advance, the US manufacturing PMI will overwhelm the boom line below , and diesel demand may collapse. "The collapse of diesel demand will not only lead to a weakening of the unilateral price of crude oil, but will also lead to a decline in the diesel cracking price spread." In his opinion, the decline in the diesel cracking price spread will also affect other varieties in the oil-chemical sector, such as asphalt plate profits and the diversion effect of low-sulfur fuel oil raw materials.
This article is from Futures Daily
