Ping An View:
Weekly hot comments: 1. The Russian Ukrainian war triggered a huge earthquake in the global market. The subsequent impact of the conflict between Russia and Ukraine on the market includes: 1) further rise in energy prices, pushing up global inflationary pressure. 2) Short term risk aversion may cause stock market adjustment, or inhibit the consumption ability and willingness of American residents, and then form a certain deflationary pressure. 3) There is a risk that the term spread of US bonds will narrow faster. In the short term, more risk averse funds flow into US bonds, but the market is more cautious about the medium-term economic outlook of the United States, and the interest rate of long-term US bonds is more suppressed. 4) The US dollar index gained new gains, as the impact on the European economy may be greater than that of the United States, and the medium-term inflation risk of the United States increased. 2. The Fed's expectation of raising interest rates continued to fluctuate. According to CME data, as of February 26, the market expects the probability of the Fed raising interest rates by 25bp in March to be 76%. Our judgment on the tightening rhythm of the Federal Reserve is that in the short term, due to the intensification of market turmoil, we may need to be more cautious (in March, we chose to raise interest rates only by 25bp instead of 50bp). In the medium term, it is more necessary to curb inflation and control the narrowing range of the term interest rate of US bonds. On the one hand, it is necessary to continue to raise interest rates (such as raising interest rates continuously in May and June, or even 50bp at a time). On the other hand, it is also necessary to actively promote the process of shrinking the table and mitigate the risk of too fast flattening or even upside down of the yield curve to economic and financial stability.
Overseas economic tracking: 1) US economy: the US core PCE inflation rate in January was 5.2%, in line with expectations. Personal consumption expenditure in the United States rebounded significantly in January, mainly driven by commodity consumption, and service consumption is still lower than that two years ago. With the decrease of social welfare income, the year-on-year growth rate of personal disposable income in the United States has been slightly lower than that of consumer expenditure. The personal savings rate in the United States is 6.4%, which is lower than the pre epidemic level of more than 7%. In February, the US Chamber of Commerce's consumer confidence weakened and consumer expectations fell, as "inflation fear" fermented again. The growth rate of house prices in 20 cities in the United States rebounded, but the rise of loan interest rate may curb the demand for house purchase in the future. The latest US 30-year mortgage fixed rate is 3.89%. 2) European economy: EU data before the outbreak of the Russian Ukrainian War showed that the economic boom of the eurozone rebounded more than expected in February. After the outbreak of the Russian Ukrainian war, the problem of energy shortage in Europe may intensify. Due to the high external dependence of energy, the erosion of energy prices and inflationary pressure on its consumption capacity and the damage to the European economy need to be paid high attention. 3) The growth rate of the epidemic was lower in most parts of the United States and Europe. Many overseas places continue to promote economic unsealing, the UK announced that it "coexists with covid-19 virus", Ireland, Denmark and other EU countries have also fully unsealed, and many places in Asia continue to relax border controls.
Global Asset Performance: 1) global stock market: Russian stocks plummeted, European stocks were under pressure, and US stocks rebounded slightly. On the one hand, the direct impact of the Russian Ukrainian conflict on the US economy is limited. On the other hand, the market's expectation of the Fed's interest rate hike has temporarily cooled. 2) Global Bond Market: US bond term spreads continued to narrow and inflation expectations rebounded. The spread between 10-year and 2-year US bonds narrowed to 42bp. The 10-year US bond yield rose 5bp to 1.97% throughout the week. Five year tips implied inflation expectations rose 16bp to 3.02% for the whole week. 3) Bulk commodities: Brent crude oil, aluminum, wheat and other commodities rose sharply; Gold prices fell slightly. 4) Exchange rate: the US dollar index broke 97 again. On the 24th, the dollar index broke through the 97 mark again, rising to 97.7 as high as in the session; The dollar index fell on the 25th. According to Reuters, as of the week of February 22, the size of net dollar long positions fell to $5.8 billion from $6.76 billion the previous week.
