Weekly hot comments: 1) the situation in Russia and Ukraine is becoming clear. Ukraine said it was impossible to join NATO in the next few years, and Russia said the negotiations "have made some progress". We believe that if the Russian Ukrainian negotiations reproduce positive progress in the future, the market risk aversion is expected to ease significantly. However, limited energy supply, blocked economic growth in Europe and rising global economic and political uncertainty will continue, and the price of global safe haven assets will remain high and volatile. 2) Energy tensions in Europe are expected to ease. Germany said it opposed banning the import of energy products from Russia. The EU has proposed the REpower EU strategic plan to reduce its dependence on Russian energy. We believe that the EU attaches more importance to energy security than expected by the market. However, at present, the market has not been able to accurately price the impact of the EU REpower EU strategic plan, because its impact is controversial. 3) The surge in London nickel futures disturbed the market. From March 7 to 8, LME nickel increased by 250% in two days, exceeding US $100000 / ton. LME then announced the suspension of nickel trading. We believe that the sharp rise in nickel futures may be an epitome of the rising volatility risk in the current international commodity futures market. Because of the sharp rise in prices of some commodities in the current round, the existence of speculative trading may give rise to commodity price bubbles. Moreover, once the price of a certain variety of products is abnormal, the market sentiment is likely to spread to more relevant commodities, bringing broader market risks.
Overseas economic tracking: 1) the CPI of the United States increased by 7.9% year-on-year and 0.8% month on month in February, and inflation accelerated upward; Energy CPI rose 3.5% month on month, much higher than the previous value of 0.9%. 2) Job vacancies in the United States fell slightly in January, but they are still at an all-time high. 3) The number of initial jobless claims in the United States was 227000 and the number of renewed jobless claims was 1494000. The overall performance of the job market was stable. 4) In the United States, the initial value of the University of Michigan consumer confidence index in March was 59.7, continuing to hit a new low since 2011; In March, consumers' inflation expectations for the next year rose to 5.4%, the highest since 1981. 5) The European Central Bank unexpectedly "released the eagle", accelerated the reduction of asset purchase, significantly raised the inflation expectation in 2022 and lowered the economic growth expectation in 2022. We expect that the ECB will still be cautious about raising interest rates, or raise interest rates for the first time at the end of the year or next year.
Global Asset Performance: 1) European stocks rebounded significantly, and the stock markets in most other regions are still under pressure. Germany's DAX index rose 4.1% for the week. The S & P 500 fell 2.9% for the week. From March 9 to 10, overseas Chinese concept stocks plunged for two consecutive days, triggered by the announcement of five companies on the identified list by the U.S. Securities and Exchange Commission (SEC). 2) The interest rate of each year's US bonds rebounded, and the implied inflation expectation of US bonds reached a new high. The 10-year US bond interest rate rose 26bp to 2.0% throughout the week. Five year tips implied inflation expectations rose sharply by 33bp to 3.52% throughout the week, continuing to reach a record high. The spread between 10-year and 2-year US bonds was 0.25 percentage points. We still need to be vigilant about the narrowing or even upside down of the term interest rate of 10-year and 2-year US bonds, and the possible fluctuations in the financial market. 3) The prices of major commodities such as crude oil and metals fell collectively. Brent and WTI crude oil futures fell about 5% throughout the week to close at about $110 / barrel. The cooling of oil prices is mainly affected by the progress of Russia Ukraine negotiations and the news that the EU opposes the ban on Russian energy imports. At present, the supply of crude oil fundamentals is still tight. 4) The US dollar strengthened, while the yen, Swiss franc and Sterling weakened sharply against the US dollar. The US dollar index closed at 99.13, up 0.62% for the whole week. The European Central Bank "hawked" but failed to significantly push up the euro. The yen hit a five-year low against the US dollar.
