earncryptowhilegaming| The rumor of "stagflation theory" in the U.S. economy is gradually rising. The momentum of loose trading is rekindled
Transferred from: Shanghai Securities News
◎ reporter Chen Jiayi
Recently, the market has talked to the Federal ReserveEarncryptowhilegamingThe interest rate cut is expected to rise again, and the main line of trading in overseas markets has been switched again.
Yields on multiple-maturity Treasuries have fallen from highs since May. At one point, the yield on 10-year Treasuries fell below 4.EarncryptowhilegamingAt the .50% round mark, the yield on 2-year US bonds fell to around 4.8%. The dollar index fell 0.6% during the month and is currently fluctuating above the 105 mark.
Analysts believe that the unexpected cooling of non-farm data and the Fed's "pigeon" position have led the market to regain expectations of interest rate cuts. In the follow-up, it is still necessary to observe the relevant trends of the Federal Reserve in the light of economic data, and the game around "interest rate cut expectations" may still be the main trading line for some time to come.
The momentum of overseas "loose trading" has been revived.
After the crackdown on the expected withdrawal of interest rate cuts, the momentum of "loose trading" in overseas markets has been revived recently.
Us bond yields rose sharply in April as a whole, with 10-year yields rising as high as 4.73 per cent. Yields on multi-maturity Treasuries have fallen back to high levels since May, with 10-year yields falling below the 4.50 per cent round mark at one point, down more than 3 per cent so far.
The shift in the main line of market trading is due to the unexpected weakness of US economic data. Recent data released by the Bureau of Labor Statistics showed that US non-farm payrolls rose by 175000 in April, well below expectations of 240000; the average hourly wage increase was the lowest since June 2021, while the unemployment rate rose slightly to 3.9 per cent.
Meanwhile, the Fed left interest rates unchanged for the sixth time in a row at its May meeting and announced a slowdown in quantitative tightening from June. Against the backdrop of the sustained rebound in US inflation in the first quarter of this year, the latest resolution stated only that "there is a lack of progress towards the target of inflation towards 2%." Federal Reserve Chairman Powell also weakened the market's discussion of "raising interest rates again" in his speech, making the market look forward to cutting interest rates again.
The Fed's observation tool shows that expectations of the Fed's two interest rate cuts this year have fully returned, and the market now expects the Fed to cut interest rates for the first time as early as September.
Reappearance of the risk of stagflation in American economy
With weaker-than-expected growth and higher-than-expected inflation, there is a growing wind of "stagflation" in the US economy.
According to the Bureau of Economic Analysis of the US Department of Commerce, real GDP in the US rose 1.6 per cent on an annualised basis in the first quarter, far less than the 2.5 per cent expected by the market and a sharp slowdown from 3.4 per cent in the fourth quarter of last year. The latest non-farm data is unexpectedly lower than expected, adding another example of "lag".
"traders are used to being scanned by the resilience of the US economy, but the current'US economic exceptionalism 'has been called into question." Said David Scott, a senior analyst at Jiasheng Group.
While economic growth is slowing, inflation in the United States is still sticky. Data show that the US PCE price index discounted at an annualised rate of 3.4% in the first quarter, up from 1.8% in the fourth quarter of last year, and the core PCE price index at an annualised rate of 3.7%, up from 2.0% in the fourth quarter of last year.
Analysts believe that the current US economy is more likely to be "stagnant" than "inflated". Gao Ruidong, chief economist and director of the Institute of Everbright Securities, said that despite the strong stickiness of US inflation and weaker economic data in the first quarter, there are no obvious signs of "stagflation". The main drag on the US economy in the first quarter is import and export trade, the growth rate of consumption and investment is still high, and the US GDP is often seasonally low in the first quarter. At the same time, the risk of re-inflation in the United States is also easing, and it is expected that inflation in the United States will continue to decline step by step.
Nevertheless, the risk of stagflation can not be ignored. Morgan Stanley said in the report that there was a medium-term risk to the US economy, with the probability of a recessionary "hard landing" or "stagflation" rising to 25 to 30 per cent. The reason is that the widening economic gap between businesses and households makes it easier for the US economy to go from boom to bust.
The game of "interest rate cut expectation" continues.
It can be expected that the game of "interest rate cut expectations" will still be the main line for some time to come.
In the view of analysts, the continuation of "easy trading" still faces a lot of uncertainty, and may now focus more on the narrative of inflation. The Societe Generale Securities Research News believes that the game of interest rate cut expectations may continue to focus on inflation, and the opening of loose expectations requires a significant improvement in inflation or "unexpected weakness" in the labor market, and the second quarter may still be a period of market shocks.
After reviewing the continuous rotation of the asset "tuyere" this year, China International Capital Corporation concluded that the main line behind it is the reflexivity of loose and tight US interest rates and financial conditions. The agency believes that the Fed is still likely to cut interest rates this year, which must be based on tightening financial conditions, so the Fed must maintain its tightening posture for a certain period of time. The contraction deceleration helps to reduce financial liquidity pressure, and the inflection point may occur at the end of the second quarter.
Gao Ruidong said that the Fed's interest rate cut is more certain, US bond yields are expected to fall, overseas "re-inflationary trading" may come to an end. In terms of the pace of interest rate cuts, the weaker US employment data in April helped the Fed turn the pigeon. At the same time, with the US election approaching, the political factors became more prominent. The Fed is more willing to maintain the economy than to strictly control inflation, and the September rate cut is more certain. Judging from the trend of US bond yields, taking into account the recent decline in US economic data, the decline in oil prices and the announcement by the Federal Reserve to slow the pace of contraction from June, all these have helped to push US bond yields back steadily and lead to an improvement in the overseas liquidity environment.
(responsible Editor: sun Dan)
