Brief comments on the focus of this week: 1) the International Monetary Fund lowered the global economic growth rate to 3.6% in 2022. According to the latest world economic outlook report of the International Monetary Fund (IMF), affected by the conflict between Russia and Ukraine, the global economy is expected to grow by 3.6% in 2022, down 0.8 percentage points from the forecast in January. We believe that after the outbreak of the conflict between Russia and Ukraine, international commodity prices soared, bringing obvious "stagflation" pressure to the global economy. However, the impact of the rise in commodity prices on different countries is different, and some resource exporting countries will benefit from the rise in commodity prices. 2) A number of Fed officials spoke out and continued to guide austerity expectations. This week, many Fed officials continued to speak in public to convey hawkish messages to the market. Most importantly, Federal Reserve Chairman Powell completely turned the hawk, saying that "it is appropriate to act faster, and raising interest rates by 50 basis points at the May meeting will be one of the options". However, we believe that with the deepening of interest rate hikes and the weakening of the momentum of U.S. economic recovery, the tightening pace of the Federal Reserve may not be as firm as expected. Once the inflationary pressure eases or the economy shows signs of recession, in order to achieve a "soft landing" of the economy, the Federal Reserve may slow down the pace of interest rate hike, and the pace of interest rate hike throughout the year may be "fast before slow", which is also true for the contraction of the table.
Overseas economic tracking: 1) U.S. economy: in March, the number of new housing starts in the United States increased by 0.3% month on month, equivalent to an annual rate of 1.79 million units, higher than the market expectation of 1.74 million units, reaching a new high since 2006. However, in March, the total sales of existing houses decreased by 2.7% month on month, which has decreased for two consecutive months. The number of quarterly adjustment years was 5.77 million, a new low since June 2020. The main reason for the decline in sales in the U.S. real estate market is the sharp rise in mortgage interest rates. The fixed interest rate of 30-year mortgages rose to 5.11% on April 16, reaching a new high in nearly 10 years. In addition, factors such as rising raw material prices have significantly pushed up housing prices and began to restrain housing demand. 2) European economy: the final year-on-year value of HICP in the eurozone in March reached 7.4%. Although it was slightly lower than the initial value of 7.5%, it still hit a new high since statistics. The year-on-year impact of energy alone on HICP reached 4.4 percentage points. The trend of manufacturing PMI in major European economies was divided in April. The initial value of manufacturing PMI in Germany fell significantly in April, but France unexpectedly rebounded.
Global Asset Performance: 1) major global stock indexes continued to callback, led by China's gem index. The "Hawk" speech of Fed officials continued to suppress US stocks. The warming conflict between Russia and Ukraine, slowing economic growth and soaring bond yields led to a slight correction of European stocks. The market is still worried about the delisting of Chinese stocks, and the Hang Seng Index fell 4.1% throughout the week. 2) The yield of 10-year US bonds broke 2.9%, and the interest rate difference between 10-year and 2-year US bonds narrowed. Market interest rate hikes are expected to continue to heat up. The yield of short-term US bonds has increased significantly. The yield of two-year US bonds has increased by 25bp to 2.72%, and the difference with the yield of 10-year US bonds has narrowed to 18bp again. 3) The prices of major commodities were all corrected, and the prices of crude oil and silver fell significantly. Factors such as interest rate hikes by the Federal Reserve, repeated outbreaks in China and bleak prospects for global economic growth may curb crude oil demand. 4) The US dollar index continued to rise to 101.12, and non US currencies depreciated. At the same time, the RMB exchange rate also depreciated under the influence of factors such as the decline of export boom, the phased increase of downward pressure on the economy, the rise of the US dollar index and the differentiation of monetary policies between China and the United States.
