(1) the Federal Reserve's interest rate meeting in May raised interest rates by 50bp, the US dollar strengthened, and US bond yields continued to rise
On April 21, Fed chairman Powell said that at the meeting from May 3 to 4, the Fed "will discuss" raising interest rates by 50 basis points, and pointed out that many central bank officials had felt that such a move was appropriate during the previous meeting in March. The continuous record high inflation data and relatively strong economic recovery in the United States have led the Federal Reserve to consider taking a more active monetary policy tightening path. From the perspective of market expectations, since mid April, the market's expectations for the fed to increase the rate hike and accelerate the pace of interest rate hike have increased significantly. According to the data released by CME, the market expects the probability of raising interest rates by 50 BP at the interest conference in May to rise from 90.4% on April 14 to 99.6% on April 21. On the basis of raising interest rates by 50 BP in May, the probability of further raising interest rates by 75 BP at the interest conference in June is expected to rise from 28.4% on April 14 to 69.8% on April 21. With the expected acceleration of the magnitude and pace of the Fed's liquidity tightening, the US bond yield continued to rise this week, and the US dollar index broke 100.
While the Fed's attitude continues to "turn the eagle", ECB president Lagarde said in an interview with CNBC on Friday that the ECB's net asset purchase may end in July or August, followed by an interest rate hike later this year. The global economy is entering a tightening cycle at a faster pace.
(2) with the devaluation of RMB, the interest rate gap between China and the United States narrowed, and the tightening of peripheral liquidity, the constraints on China's easing became more and more obvious
This week, the open market operation of the central bank continued to remain stable, with a daily investment of 10 billion yuan of 7D reverse repo and an interest rate of 2.1%. Superimposed on the previous investment of reverse repo, which expired this week, the open market operation of the central bank returned a net 10 billion yuan throughout the week. In terms of money market interest rate, as of April 22, dr007 and shibor1w were 1.54% and 1.70% respectively, down 19 BP and 12 BP respectively compared with April 15. The money market interest rate was significantly lower than 2.1% of the reverse repurchase bidding interest rate, indicating that the market liquidity was abundant.
This week, the RMB depreciated against both the US dollar and the euro (as of Friday, the central parity of RMB depreciated by 1.1% against the US dollar and 1.43% against the euro). The interest rate spread between China and the United States continued to hang upside down, which comprehensively reflected: 1. The peripheral liquidity was further tightened; 2. China's exports have been squeezed and gradually weakened under the recovery of overseas supply chain; 3. With the intensification of the epidemic in China, the market confidence in China's economy has weakened. On the whole, the devaluation of the RMB and the upside down of the interest rate gap between China and the United States indicate that the constraints on China's loose monetary policy are becoming more and more obvious.
(3) the epidemic has an obvious impact on the economy, and the pressure on steady growth has increased significantly
2022q1 GDP was + 1.3% month on month, down from 1.5% of Q4 in 2021. Compared with Q1 month on month growth over the years, it was only higher than 2020q1 and 2021q1, indicating that the marginal economic kinetic energy of 2022q1 was weakened and not strong compared with the same period in history. However, due to the disturbance of the epidemic in Q1 last year, the base is relatively low. The GDP of 2022q1 remains unchanged, reaching + 4.8% year-on-year, up from + 0.8pcts in the fourth quarter of last year. In terms of expenditure method, final consumption in Q1 boosted GDP by + 3.3pcts, compared with + 3.4pcts in Q4 last year, and total capital formation boosted GDP by + 1.3pcts, compared with -0.5pcts in Q4 last year. Net exports of goods and services boosted GDP by + 0.2pcts, compared with + 1.06pcts in Q4 last year. In Q1 this year, under the condition that the consumption is not booming due to the epidemic and the driving effect of net exports on GDP is also weakened, the forward investment (mainly infrastructure investment in investment, 2022q1, manufacturing investment and infrastructure investment respectively drive the year-on-year rise of fixed investment + 5.0pcts and + 3.1pcts, and real estate investment only drives the year-on-year rise of fixed investment + 0.2pcts) has an obvious effect on stabilizing the economy.
The first quarter economic data showed that it was more difficult to stabilize growth. To achieve the annual GDP growth target of + 5.5%, the average quarterly GDP from Q2 to Q4 should reach at least + 1.54% month on month, and the corresponding GDP from Q2 to Q4 should be at least + 5.13%, + 6.01% and + 6.05% year-on-year respectively. At present, the epidemic is still spreading, geopolitical conflicts are still uncertain, and the triple pressure of demand contraction, supply shock and weakening expectation on China's economy is still heavy, The economic growth target of 5.5% is not easy to achieve.
This week, the subway passenger flow in the top 10 cities continued to be significantly lower than that in the same period last year. Except Shanghai, where the subway was almost shut down, Chongqing had the smallest year-on-year decrease of - 18.5% and Suzhou had the largest year-on-year decrease of - 81.3%. In terms of quantity, among the 10 major cities (except Shanghai), the decline of passenger flow in Guangzhou, Chengdu and Nanjing was narrower than that of last week, and the decline in the other six major cities was larger than that of last week. In terms of consolidation, the total passenger flow of the top ten cities this week decreased by 51.9% year-on-year, an increase from - 48.7% last week. Because the subway in Shanghai was almost shut down and the passenger flow of other cities decreased to varying degrees, the total passenger flow of subway in 10 major cities decreased by 48.7% in the first three weeks of April, significantly higher than - 25.1% in March. The impact of the epidemic on consumption in April may be further expanded than that in March. From April to now, there is a big gap between the commercial housing transaction area of 30 large and medium-sized cities, the land transaction area of 100 large and medium-sized cities and the land premium rate of 100 large and medium-sized cities compared with the same period last year. Among them, the transaction area of commercial housing in 30 major cities was - 56.8% year-on-year (as of the third week of April, it was - 46% in March), and the transaction area of land in 100 large and medium-sized cities was - 54.0% year-on-year (as of the second week of April, it was - 32.7% in March). On the whole, in the case of weak consumption caused by the epidemic and the bottom of real estate, the downward pressure on the economy in April was still not small.
(4) inflation: CPI is expected to rise and PPI is expected to fall in April
In April, according to the data as of April 23, the prices of grain, oil, vegetables, meat and dairy products in food decreased month on month, while the prices of aquatic products, eggs and fruits increased month on month. On a year-on-year basis, the prices of meat and dairy products decreased year on year, and the prices of grain, oil, vegetables, aquatic products, eggs and fruits increased year on year. Among them, the prices of vegetables increased by more than 20% year on year and the prices of eggs increased by more than 15% year on year, continuing the trend in March. For non food, on the one hand, the prices of diesel, gasoline and liquefied petroleum gas fell compared with the previous month, but the prices are still between + 21% and + 46% year-on-year (down from the previous month). On the other hand, the inflation in the upstream is expected to be further transmitted to the downstream. Combined with the tail warping factor, the CPI is expected to be + 1.8% year-on-year in April, further upward compared with March. Overall, we believe that there is a certain upward risk of CPI continuously exceeding expectations in the second quarter, but it is unlikely to restrict monetary policy by breaking through 3% from April to June.
In April, as of April 10, the data showed that the performance of coal price and steel price was stable. Compared with the same period last year, the coal price increased more year-on-year, and the steel price changed little. As of April 23, the data showed that the oil price was running at a high level, and increased more compared with the same period last year. As of April 23, the data showed that the price index of means of production of the Bureau of statistics was + 1.83% month on month and + 24.63% year-on-year. Combined with the tail warping factor, the PPI in April is expected to be + 8%. PPI will continue to decline year-on-year, but under the development of international geographical conflicts and the fermentation of China's epidemic, the pace of decline of PPI may be slower than previously expected.
(5) follow up judgment: the importance of fiscal policy and the continued moderate relaxation of real estate regulation is highlighted
The economic data in the first two months of this year performed well and generally exceeded market expectations. However, according to the economic data in March, consumption, export, manufacturing investment and real estate investment weakened in an all-round way, and only infrastructure investment improved from January to February. The spread of the impact of international geopolitical conflicts and the significant intensification of the epidemic in China have posed all-round pressure on China's economic operation in the short term. The triple pressure of shrinking demand, supply shock and weakening expectation is still heavy. April data show that consumption and real estate investment may continue to be under pressure. On the whole, the downward pressure on the economy is still not small. It is expected that the follow-up policies will be more active and the steady growth policy will continue to increase. In terms of monetary policy, due to the low capital interest rate in the money market, there is a marginal decline in the stimulating effect of continued easing on the economy. At the same time, the tightening of external liquidity also restricts China's easing policy. Therefore, the central bank is more cautious in easing money at this stage (the expectation of small-scale RRR reduction and interest rate reduction by the central bank last week failed). In this case, the importance of fiscal policy and the continued moderate relaxation of real estate regulation is even more prominent.
