Event: at 20:30 Beijing time on April 12, the United States released March CPI data.
Core conclusion: the CPI of the United States peaked at a year-on-year rate of 8.5% in March, may be flat or decline in April, and is expected to accelerate its decline after May; The Federal Reserve raised interest rates by 50bp in May with a high probability, and the subsequent interest rate increase is expected to gradually cool down; The yield of US bonds has reached the top, and the adjustment of US stocks may be coming to an end; We need to pay close attention to the evolution of the conflict between Russia and Ukraine.
1. The US CPI in March was higher than expected, but the core CPI was lower than expected for the first time in half a year
Overall performance: the US CPI without quarterly adjustment in March was 8.5% year-on-year, expected to be 8.4%, and the previous value was 7.9%; Non seasonally adjusted core CPI was 6.5% year-on-year, expected to be 6.6%, and the previous value was 6.4%. It is worth noting that the year-on-year core CPI is lower than the market expectation for the first time since September 2021, which has a certain signal significance.
Sub item performance: among the main sub items of us CPI, the largest year-on-year increase in March is still energy and used cars. Among them, energy prices have fallen for three consecutive months year-on-year, and the re rise in March is mainly affected by the conflict between Russia and Ukraine; The year-on-year increase in used car prices is the first decline since October 2021, and has been negative for two consecutive months, reflecting the easing of supply bottlenecks to a certain extent. In addition, food prices rose significantly compared with the previous month, which was also affected by the conflict between Russia and Ukraine; The service items continued to rise slightly year-on-year, mainly reflecting the rise of housing prices and the improvement of service consumption demand.
Market reaction: after the release of us CPI data, S & P 500 index futures and spot gold rose rapidly, and 10Y US bond yield and US dollar index fell rapidly; Subsequently, due to the pessimistic signal released by the Russian Ukrainian negotiations, the trend of asset prices reversed to a certain extent.
2. The inflation rate in the United States has probably peaked and will accelerate its decline after May. The conflict between Russia and Ukraine is still a disturbing item
Energy price: in the previous report, we have pointed out many times that US inflation basically follows the principle of "energy sub item determines the direction and other sub items determine the range". From the perspective of global economic fundamentals and supply-demand gap, if the conflict between Russia and Ukraine does not worsen, the oil price will tend to fall. The average WTI crude oil price in March was 71.2% year-on-year and 19.5% month on month respectively. Since the beginning of April, it has decreased to 57.9% and - 8.4% respectively. Subsequently, with the decline of oil price and the rise of base, the probability continued to decline, and led the overall CPI to fall year-on-year.
Supply bottleneck: the global supply chain pressure index compiled by the New York Fed has dropped significantly for two consecutive months since the beginning of the year, reflecting that the global supply chain bottleneck has been alleviated.
Inflation measurement: according to our calculation, the CPI of the United States is likely to be flat year-on-year in April, or decline slightly in March, and will begin to accelerate after May, with about 4.5% at the end of the year.
3. The Federal Reserve has a high probability of raising interest rates by 50bp in May. After that, the expectation of raising interest rates is expected to gradually cool down
Expected change of interest rate increase: after the CPI data in March was released, the market's expectation of interest rate increase before June changed little and remained at about 3.7 times, that is, about 90% of the probability of adding 50bp to both meetings; However, the number of remaining interest rate increases in the whole year is expected to drop from about 9 to 8.4, reflecting the cooling of interest rate increase expectations.
Outlook on the rhythm of interest rate hike: in the previous report, we pointed out many times that once US inflation begins to fall and the economy continues to slow down, the probability of the Fed's monetary policy position will gradually turn dove. Considering that the FOMC meeting in May is on May 5, and the CPI data of April has not been released at the time of the session, we expect that the Fed's 50bp interest rate increase in May is a high probability event, and it is still possible to continue the Hawks' statement. However, after May, the probability of the Fed's policy position will gradually turn dove. It remains to be seen whether to add 50bp in June. Overall, we expect the fed to raise interest rates more than 8 times a year than the current market expectations. 4. 10Y U.S. bond yield is at the top, it is difficult to rise significantly, and the adjustment of U.S. stocks may be coming to an end
US debt: the core influencing factors of US debt yield are economy, inflation and monetary policy. The subsequent benchmark scenario is that the US economy continues to slow down, inflation continues to fall, and the expectation of interest rate hike gradually cools down. Therefore, at present, the high probability of 10Y US debt yield is in the top range, and it is difficult to rise further.
U.S. stocks: in the previous report, we pointed out that in history, U.S. stocks usually fell within 1-3 months after the start of interest rate hike and rose again after 3 months. At the same time, the time when NASDAQ lost the S & P 500 usually lasted about half a year. Based on our judgment on US inflation, monetary policy and US bond yield, this round of US stock adjustment may be coming to an end. In addition, due to the obvious strengthening of the correlation between A-Shares and US stocks in recent years, we expect that the impact of the Fed's interest rate hike on a shares, especially growth stocks, is also expected to gradually weaken.
Risk tip: the Fed's monetary policy orientation, US inflation and Russia Ukraine conflict continued to exceed expectations
