Chinese president Xi Jinping held a video call with US President Joe Biden on the evening of August 18. The two heads of state had a frank and in-depth exchange of views on issues of common concern such as China US relations and the situation in Ukraine. Since the video meeting between the heads of state of China and the United States in November 2021, the world has experienced major events such as the spread of covid-19 epidemic in winter and the escalation of the conflict between Russia and Ukraine to the current easing of negotiations. The two heads of state believed that the video call was constructive and instructed the working teams of the two countries to follow up in time, take practical actions, strive for the return of China US relations to the track of stable development, and make their own efforts to properly solve the Ukrainian crisis. In terms of market impact, the whole call released positive signals, and the superimposed geographical conflicts eased, which was generally good for the performance of A-Shares this week.
The special meeting of the financial committee boosted market confidence. On March 16, the financial stability and Development Commission of the State Council held a special meeting chaired by Liu He, vice premier of the State Council and director of the financial commission. The meeting pointed out that under the current complex situation, the most critical thing is to adhere to development as the party's top priority in governing and rejuvenating the country, focus on economic construction, deepen reform and expand opening-up, adhere to the principles of marketization and rule of law, adhere to the "two unwavering", earnestly protect property rights, fully implement the spirit of the central economic work conference and the deployment of the national "two sessions", and coordinate epidemic prevention and control and economic and social development, Keep the economy running within a reasonable range and keep the capital market running smoothly. From the content point of view, the meeting clearly responded to the recent concerns of the market about monetary and credit support, real estate risk, China concept shares and platform economic supervision. It is expected that efforts will still be strengthened at the level of policy support, and there may be reasonable relaxation at the level of supervision. At the same time, many departments including the central bank, China Banking and Insurance Regulatory Commission, the Ministry of Finance and China Securities Regulatory Commission issued documents to convey the spirit of the meeting and jointly stabilize confidence, which is conducive to the obvious recovery of market risk appetite for the equity market.
The Federal Reserve raised interest rates by 25bp as scheduled. On March 16 local time, FOMC issued a policy statement announcing that it would raise the benchmark interest rate by 25 basis points to the range of 0.25% - 0.5%. This is the first interest rate increase since December 2018, in line with market expectations. High inflation remains the most important concern. Federal Reserve Chairman Powell said that the inflation rate is still much higher than the long-term target of 2%, and energy prices and the crisis in Ukraine may cause additional upward pressure on inflation in the short term. Powell commented on the U.S. economy and said that the possibility of economic recession next year is not particularly high. Under the background of maintaining a strong economy, the labor market is extremely tight, which makes the U.S. economy able to cope with the Fed's repeated interest rate hikes. Overall, the Fed's statement at this meeting is hawkish, and controlling inflation is still the primary task of the fed at present. From the market reaction, US stocks fell first and then rose, gold first narrowed the decline, then turned up, the US dollar rose first and then fell, and the 5-10-year US bond yield curve hung upside down, which triggered the market's concern about the US economic recession.
The first two trading days of this week continued the trend of last week's sharp decline, and the last three trading days rebounded under the boost of the special meeting of the financial committee. On the disk, the real estate, architectural decoration and social service industries led the increase; Steel, petroleum, petrochemical and commercial retail led the decline. On March 16, the Finance Committee of the State Council held a special meeting to boost market confidence; On the same day, the two sessions of the party, the State Administration of foreign exchange and other departments successively issued a voice to stabilize the market expectation. The Ministry of Finance proposed that "there are no conditions for expanding the pilot cities of real estate tax reform within this year" to stabilize the real estate expectation; On Thursday, the Federal Reserve raised interest rates by 25bp, which is expected to land, and the overall market pessimism has been repaired. Looking back on the voice of vice premier Liu He in late October 2018, the market ushered in the bottom range of the policy after the continuous decline of Sino US trade friction. After 3-4 months of shock, in early 2019, under the storm of new regulations on goodwill impairment, Shanghai Stock Exchange ushered in the market bottom of 2440 points. However, the difference between the two times is that at that time, the Fed was in the stage of changing from the interest rate increase cycle to the interest rate cut cycle, while at present, it is the opposite. On the whole, however, the market may be at the bottom of the stage, with positive signals from the weekend meeting between the heads of state of China and the United States. It is expected that the market risk appetite will continue to repair in the future.
