The conflict between Russia and Ukraine and the sanctions imposed by the United States and Europe on Russia have significantly pushed up commodity prices, undermined the confidence of financial markets and real sectors, and increased the risk of short-term stagflation and long-term recession. The European economy is under the greatest pressure, the European Central Bank is facing a choice, and the Chinese and American economies will also bear a certain spillover impact. The euro still has obvious downward space, and the G2 currency may continue to be strong. High risk aversion and rising recession risk will still suppress the performance of risky assets such as stocks, and commodities may rise first and then fall.
International market
Money market: the Federal Reserve and the White House are facing political pressure to control inflation, and there are positive changes in labor supply. The conflict between Russia and Ukraine does not change the path of the Fed's recent interest rate increase, but reduces the long-term interest rate increase and table space. Europe is the first to face the risk of short-term stagflation and long-term recession, and the ECB is facing a difficult choice or gradually favor the latter.
Bond market: the short-term interest rate of the United States rises, but the long-term interest rate decreases, reflecting the simultaneous rise of recent inflationary pressure and long-term recession risk. The debt risk of Russia and some European countries has attracted attention.
Foreign exchange market: the conflict between Russia and Ukraine will hit the European economy, and the euro may fall below parity against the US dollar for the first time in 20 years. The US economy will slow down, but its comparative advantage over Europe is expected to expand, and the monetary policies of the US and Europe may be divided again. The Canadian dollar and Australian dollar benefited from the short-term strong bull market in commodities, and the currencies of emerging markets weakened but will be divided.
Stock market: the conflict between Russia and Ukraine has impacted the stock market, affecting the market through confidence channels, risk aversion, commodity inflation and recession risk. It has the greatest impact on the Russian stock market, followed by the European stock market, and finally the US and Asia Pacific stock markets. Whether the US and Europe will extend sanctions to the Russian energy sector will determine the top of commodities and the bottom of stock markets.
Commodities: commodities may rise first and then fall. If the conflict between Russia and Ukraine and the US and European sanctions against Russia escalate, there is still room for energy and Shenzhen Agricultural Products Group Co.Ltd(000061) prices to rise. The sharp rise in commodity prices has brought about recent economic stagflation, but after stagflation will be the risk of economic recession, which will push commodity prices down again.
Chinese market
Money market: liquidity is basically stable, and there is still room for RRR reduction. As domestic demand remains weak, real estate has fallen sharply, credit expansion has been blocked and the RMB exchange rate has strengthened, the possibility of interest rate reduction has increased.
Bond market: the yield of treasury bonds has rebounded. The market expects that the policy easing will increase after the "two sessions" and the possibility of economic bottoming will increase. The credit spread further decreased, but the decline in the credit spread of state-owned enterprises was more obvious. Bond financing fell, but it is expected to rebound and lead the expansion of social financing scale.
Foreign exchange market: the RMB exchange rate is stronger than the change of interest rate difference between China and the United States. The conflict between Russia and Ukraine has pushed up the risk aversion, but it is not as strong as the RMB, indicating that China has become the choice of some risk aversion funds at the time of European turmoil. The short-term interest rate difference between China and the United States still has room to decline, but the stabilization of China's economy and the slowdown of the U.S. economy are expected to support the basic stability of the RMB.
Stock market: A shares fell with the global stock market, but the decline was relatively small, due to the large decline in the early stage and the expectation of loose policies in China. The risk of global near-term stagflation and long-term recession will also suppress a shares, but the policies released by the "two sessions" are expected to provide important support for good infrastructure, real estate and service consumption.
Hong Kong market
Money market: the Hong Kong dollar interest rate will rise with the US dollar interest rate rise, with a longer term, and the interest rate will rise first. Recently, the Hong Kong dollar exchange rate has weakened, but it is still in the middle of the strong and weak exchange guarantee level. The bank's aggregate balance and foreign exchange reserves have decreased slightly, indicating that there is capital outflow under the expectation of US dollar interest rate increase and the conflict between Russia and Ukraine, but the pressure is still controllable.
Stock market: the conflict between Russia and Ukraine impacted the Hong Kong stock market, with technology, optional consumption and medical treatment leading the decline. The conflict between Russia and Ukraine and the risk of global recession will still suppress the performance of Hong Kong stocks, but the improvement of China's policies, the expectation of the bottom of the economy and the advantage of undervaluation will provide important support for Hong Kong stocks. The performance of Hong Kong stocks in the whole year is expected to surpass their counterparts in Europe and the United States.
