Tonight, Black Swan raided US stocks.
On the evening of April 25, Beijing time, the market was shocked by two blockbuster data disclosed by the United States. First, the data released by the US Department of Commerce shows that the real GDP of the US in the first quarter grew by 1.6% quarter on quarter from the initial value, far less than the 2.5% expected by the market, and slowed down significantly from the 3.4% in the fourth quarter of last year.
Secondly, the core PCE price index of the United States in the first quarter had a quarter on quarter annual discount rate of 3.7%, which was estimated to be 3.4%, and the previous value was 2.0%, which was the first quarter on quarter acceleration in a year. After the data was released, the interest rate swap market believed that the Federal Reserve would not start to cut interest rates until December this year, rather than November.
In the face of the unexpected "cold" economic growth and stubborn core inflation in the United States, the market worries that the risk of stagflation in the United States seems to be increasing. Affected by this, the three major indexes of the US stock market opened significantly lower, with the Nasdaq falling 2.1%, the S&P 500 falling 1.41%, and the Dow falling 1.39%. The European market also plunged, with the European Stoxx 600 Index falling 1% to the lowest point in the day; The index of Germany, France, Italy and other countries fell more than 1%.
At present, another risk point in the global financial market may come from the strong dollar. Affected by the delay in the expectation of the Federal Reserve to cut interest rates, the dollar index continued to climb and has now reached its highest point since the first ten days of November last year. According to the regression analysis of Jingshun Asset Management, every 1% increase in the dollar index, The monthly return of MSCI Global (excluding the US) stock index will fall by 0.2%.
Black Swan Raid
On the evening of April 25, Beijing time, the data released by the U.S. Department of Commerce showed that the real GDP of the United States in the first quarter increased by 1.6% quarter on quarter from the initial value, far less than the 2.5% expected by the market, and slowed down sharply from 3.4% in the fourth quarter of last year.
Data shows that the GDP weighted price index in the first quarter of this year was 3.1%, higher than the expected 3.0%, almost twice the 1.6% in the fourth quarter.
Unlike other countries, the United States regards the annual and quarterly rate of real GDP as the most common indicator to measure economic growth, and believes that it can better reflect the economic trend.
After the data was released, US President Biden issued a statement saying that the US GDP report showed stable growth, but more needs to be done.
According to the analysis, the growth in the first quarter slowed significantly due to the rising inflation in the United States and the cooling of consumer and government spending.
Among them, consumer spending increased by 2.5%, lower than the 3.3% increase in the fourth quarter. Fixed investment and government expenditure at the state and local levels helped keep GDP positive in this quarter, while the decline in private inventory investment and the increase in imports had a negative impact.
At the same time, the inflation indicator that the Federal Reserve is most concerned about also sends a major negative signal.
According to the latest quarterly inflation data, personal consumption expenditure (PCE) increased 2.5% quarter on quarter from the initial value, significantly slower than the previous value of 3.3%, and also less than the expected 3%; The core PCE price index excluding food and energy grew by 3.7% quarter on quarter (QoQ) on an annualized basis, 3.4% higher than expected, almost twice the previous value of 2%, and accelerating for the first time in a year.
Inflation rose sharply in the first quarter, including 5.1% inflation in the service industry excluding housing and energy, almost twice the growth rate in the previous quarter.
This means that the core inflation risk of the United States has risen again.
At present, the market is nervous about the monetary policy and when the Federal Reserve will start to cut interest rates. As inflation remains high, investors have to adjust their views on when the Federal Reserve will start easing.
After the data is released, the swap market is no longer fully priced. The Federal Reserve will cut interest rates before December this year. In addition, traders expect that the first interest rate cut by the Federal Reserve will be postponed to December. Interest rate swap traders now expect that the Federal Reserve will only cut interest rates by about 35 basis points in 2024, far lower than the prediction at the beginning of the year. At that time, it was expected to cut interest rates by more than six times by 25 basis points this year.
Affected by this, the three major indexes of the US stock market opened significantly lower, with the Nasdaq falling 2.1%, the S&P 500 falling 1.41%, and the Dow falling 1.39%. At the beginning of the US stock market, Meta once plummeted by more than 16%, while Microsoft, Google and Amazon all fell by more than 4%.
The European market also plunged, with the European Stoxx 600 Index falling 1% to the lowest point in the day; The index of Germany, France, Italy and other countries fell more than 1%.
The US bond market also experienced a wave of selling, with the yield of two-year treasury bonds rising to 5.018%, the highest level since November 14 last year; The yield of 10-year treasury bonds rose to 4.70%, the highest level since November 2; The yield of 30-year US bonds rose to 4.81%, the highest since November 9 last year.
Influenced by the data, the dollar strengthened again, and the dollar index rose nearly 20 points in the short term, approaching 106.
According to the schedule, the Federal Reserve will hold a meeting next week, and the market is expected to keep the interest rate at the high level in the past two decades. Traders will analyze the remarks of Federal Reserve Chairman Powell to find the latest clues about easing policy.
Risk from USD
At present, another risk point in the global financial market may come from the strong dollar.
Recently, the dollar index has continued to climb, and has now reached the highest point since the first ten days of November last year, and maintained at about 106. Since this year, the dollar index has risen by more than 4%.
According to the regression analysis of Jingshun Asset Management, every 1% increase in the dollar index, The monthly return of MSCI Global (excluding the US) stock index will fall by 0.2%.
The currencies of Asian countries, including Japan, South Korea and Indonesia, are under great pressure of depreciation. Among them, the exchange rate of the yen against the dollar has fallen below 155, a new low since June 1990.
The market is worried that under the huge pressure of depreciation, the Bank of Japan may "air raid" the market. The Bank of Japan will announce its latest monetary policy decision on Friday (April 26), and the market expects the Bank of Japan to keep interest rates stable.
At present, yen traders are holding their breath, ready to respond to possible market intervention and changes in central bank policies at any time, in order to prepare for a repeat of the scene in September 2022. At that time, the Bank of Japan's loose monetary policy decision triggered a sharp reaction in the market.
According to the latest report of Japan Jiji News Agency, the Bank of Japan will consider taking measures to reduce its government bond purchases.
Takeshi Yamaguchi, chief Japanese economist of Morgan Stanley, believes that the governor of the Bank of Japan, Yoshihiro Ueda, may make stronger remarks. It is expected that the Bank of Japan will raise the interest rate by 15 basis points in July 2024, making the policy interest rate reach 0.25%, and will raise the interest rate by another 25 basis points in January 2025.
UBS pointed out in the report that the possibility of the Bank of Japan raising interest rates in July cannot be ruled out, and with the further depreciation of the yen, this possibility has risen from 40% at that time to more than 45%. Before raising interest rates, the Bank of Japan may also gradually reduce the purchase of government bonds in June.
UBS believes that with the weakening of the yen, the possibility of interest rate increase in July has risen from 40% in March to more than 45%.
Editor in charge: Yang Yucheng
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