Overseas: differences in "stagflation" transactions
In April, the geopolitical situation in Russia and Ukraine remained stalemate, the tightening expectation of the Federal Reserve was still heating up, and there were differences in "stagflation" transactions in overseas markets. 1) Interest rates on long-term US bonds soared. The margin of the market's concern about "stagnation" eased, and the expectation of interest rate increase and table contraction increased. The real interest rate of US bonds rose at a low level, and the interest rate of 10-year US bonds fluctuated downward after breaking through 2.9% on April 19. 2) US stocks adjusted significantly. As of April 26, the S & P 500 and Nasdaq fell 7.8% and 12.2% respectively since April. 3) The dollar continued to strengthen. Since April, the US dollar index has broken through the shock range of 98-99 and rose to more than 102 points. The United States is relatively less negatively affected by the conflict between Russia and Ukraine, supporting the strength of the US dollar. The IMF's latest forecast in April lowered the global economic growth forecast for 2022 by 0.8 percentage points to 3.6%, but only 0.3 percentage points to 3.7% for the US economy. Looking forward to may, the Federal Reserve will raise interest rates by 50bp with a high probability and start (or notice) to shrink the table at the same time. April inflation data is particularly critical. If the inflection point of inflation indicators comes, the market's tightening expectations are expected to cool down and risk appetite is expected to rise marginally.
China: downward pressure on fundamentals increases
In March, China's main economic indicators fell, and employment pressure surfaced. Since April, the downward pressure on China's epidemic and fundamentals has not been alleviated, while the volatility of international capital flows and overseas asset prices has intensified, and the unstable factors facing China's economy have increased. 1) In March, the downward pressure on the economy increased, and the employment pressure surfaced. The recovery of service industry and consumption has been periodically frustrated under the influence of the epidemic, the conflict between Russia and Ukraine has had a negative impact on export growth, the downward pressure on real estate investment is still large, and only the growth rate of infrastructure investment has increased. 2) In March, new social finance rebounded strongly supported by on balance sheet credit and government bond issuance, but the demand for residents' loans was weak, and the increase of enterprise financing mainly came from short-term loans and bill financing. 3) Asset prices: under the influence of the still great pressure of epidemic prevention and control in April, weak Chinese economic data, rising US dollar index and upside down interest rate spread between China and the United States, RMB assets are under pressure, and China's stocks, bonds and foreign exchange weaken simultaneously.
Policy: make more efforts to help enterprises rescue
1) monetary policy: the reserve requirement reduction announced by the central bank on April 15 was lower than the consensus expectation of the market. Under the new situation of continuous conflict between Russia and Ukraine and contraction of Fed policy, the constraints faced by interest rate reduction are also tightening. However, the central bank launched a number of structural refinancing support tools such as scientific and technological innovation, logistics and pension. 2) Fiscal policy: fiscal expenditure accelerated in the first quarter, supporting investment in infrastructure, and the retention and rebate of value-added tax is accelerating. 3) In addition, in view of the impact of the epidemic and inflationary pressure, all departments have actively introduced policies to help enterprises. We believe that we should not underestimate the determination and ability of the follow-up "steady growth". After the Politburo meeting sets the tone, the route of steady growth will be further clarified. The finance is expected to launch more expansionary plans in the fields of consumption and infrastructure. The implementation of structural monetary policy tools will help to realize "wide credit", and industrial policies will make greater efforts to promote the upstream "supply and stable price".
