Brief comments on the focus of this week: 1) the United Nations lowered its global economic growth forecast for 2022 by 0.9 percentage points. The world economic situation and Outlook report updated by the United Nations on May 18 predicts that the global economy will grow by only 3.1% in 2022, and the global inflation rate is expected to rise to 6.7%. Based on the latest report of the United Nations, we believe that we need to pay attention to the four risks of the global economy: first, the global inflation risk continues to rise. Second, the volume of Global trade has shrunk. The United Nations significantly lowered its global trade growth forecast for 2022 by 1.6 percentage points to 4.1%, significantly lower than 10.4% in 2021. Third, the risk of global central bank monetary tightening. Fourth, the global debt pressure has intensified. The United Nations estimates that more than 50% of the world’s regions or at least face the risk of increased debt pressure. 2) The Fed tends to be “stable” and the European central bank tends to be “Eagle”. In the past week, Fed chairman Powell, Philadelphia Fed Huck, St. Louis fed Brad and other officials made speeches, but overall, they did not release heavy information. As of May 21, the total probability of the Fed raising interest rates to 2.50% or 2.75% at the end of 2022 according to CME statistics was 88.4%, which was 88.1% a week ago, with little change. According to the minutes of the April meeting of the European Central Bank, the management committee plans to reverse the ultra loose policy. At present, the market generally expects that the European Central Bank will decide to end the bond purchase plan around the middle of the year at its meeting on June 9, and may discuss or announce an interest rate increase at its meeting in July. At present, the market is pricing the interest rate increase of the European Central Bank for the rest of 2022 at about 1 percentage point. We believe that the monetary policy “tightness gap” between the European Central Bank and the Federal Reserve will be narrowed, and the attractiveness of the US dollar relative to the euro may be weakened.
Overseas economic tracking: 1) retail sales in the United States increased by 0.9% month on month in April, and rising prices have not significantly inhibited consumer demand. 2) U.S. industrial output increased for the fourth consecutive month in April, thanks to the acceleration of automobile and mining production. 3) Existing home sales in the United States fell to a new low since June 2020 in April. Rising house prices, limited inventory and the sharp rise in borrowing costs have put pressure on house purchase. 4) The number of new claims for unemployment benefits in the United States continued to hit a record low, but the number of new claims for unemployment benefits rebounded. 5) The euro zone’s commodity trade deficit in March hit the second highest on record, and the trade situation continued to deteriorate. 6) The final year-on-year value of HICP in the eurozone in April was slightly reduced to 7.4%, unchanged from March, and the inflation rate may be peaking. 7) The real GDP of the eurozone in the first quarter still increased slightly by 0.3% month on month and 5.1% year-on-year. 8) The European Commission expects economic growth to fall to 2.7% and inflation to rise to 6.8% in 2022.
Global Asset Performance: 1) us and European stock markets performed poorly, and most Asian stock markets recovered. The poor earnings of large US retailers triggered concerns about high inflation and economic recession. The Nasdaq, S & P 500 and Dow fell 3.8%, 3.0% and 2.9% respectively throughout the week. 2) The 10-year US bond yield fell below 2.8%, and the implied inflation expectation hit a new low in nearly three months. The 10-year US bond yield fell 15bp to 2.78% for the whole week, the lowest since April 26; Implied inflation expectations fell 14 BP. 3) After the oil price fluctuated sharply, it basically leveled off throughout the week, and metal and non-metal prices rose. The spot prices of gold and silver in London rose by 1.3% and 5.7% respectively throughout the week, mainly driven by the rise in safe haven demand after the decline of US stocks and the depreciation of the US dollar. LME copper and aluminum rose 2.3% and 5.0% respectively throughout the week. Brent and WTI crude oil futures rose 0.9% and fell 0.2% respectively throughout the week. 4) The US dollar index fell 1.36% for the whole week to close at 103.3 points, the Swiss Franc rose 2.89% against the US dollar and the euro rose 1.44% against the US dollar.
