Last week's market review:
(1) in terms of exchange rate, the US dollar formed a phased top and the RMB index continued to decline. (2) In the bond market, the upside down of interest rate spread between China and the United States on 10-year Treasury bonds has temporarily ended. (3) In terms of stock market, European and American stock markets fell, and A-Shares continued to rise. (4) In terms of commodities, the international oil price continued to fluctuate around us $110 / barrel, and soybean futures soared by 3.98%.
Comments on last week's important events:
(1) the minutes of the ECB meeting were transferred to "Eagle". On May 19, the ECB released the minutes of its April meeting, expressing its concern about the downward economic outlook and the sharp upward inflation. The ECB's attitude towards monetary tightening is certain, but the pace and intensity of tightening are still under discussion. We believe that the pace of austerity of the European Central Bank is too slow, and the expectation of high inflation may lead to higher wages, which will make inflation more stubborn.
(2) the US dollar index fell. This week, as the minutes of the European Central Bank meeting turned to "Eagle", China's epidemic prevention and control effect was remarkable, and the impact of the upcoming resumption of work and production, the US dollar index fell. In the monthly report on asset allocation of major categories in May, we predicted that due to the monetary tightening of the European Central Bank, the US dollar index is about to reach a phased top. From the perspective of the United States itself, the Fed's expectation of raising interest rates supports the US dollar, the weak economic growth forms the phased top of the US dollar, and the US dollar will still swing under the confrontation of these two forces.
(3) real estate continues to make efforts to "implement policies for the city". Last week, the first house loan was reduced by 20bp and the five-year LPR interest rate was reduced by 15bp. The signal of the central government to stabilize the real estate market was clear and firm, and the real estate policy of "implementing policies according to the city" in many cities continued to work. However, from the "half day tour" of the new deal on the purchase of second-hand houses in Nanjing, it can be seen that "housing without speculation" is still the red line of policy relaxation. At present, under the repeated epidemic situation in some areas, the boost of short-term policies on the demand side is not obvious, and the real estate market is still in a period of in-depth adjustment. The volume and price of housing in the third tier cities fell together, the rise of house prices in the first and second tier cities fell, and the year-on-year decline of transaction area showed a marginal improvement.
(4) Shanghai will promote the resumption of business and market by stages. Last week (as of May 20), the weekly average value of the congestion delay index in Shanghai was 1.41, a big rebound from April. The regional epidemic in Beijing has not been stopped. The average congestion delay index in Beijing on the first 20 days of May was 1.24, down 23% from April; The average daily subway passenger volume was 1.96 million, down 67% from April. Recently, China has carried out consumer voucher issuance activities in many places, but the epidemic development situation in key areas is not clear. Social zero consumption may still be affected in May, but it may be warmer than that in April.
Restatement of recent views: (1) US monetary policy: the 25bp interest rate increase in March and 50bp interest rate increase in may have fulfilled our expectations, and it is expected that the cumulative interest rate increase in the whole year may be 475bp; (2) In order to promote the recovery of the real estate market, China's interest rate reduction is accelerated, and it is expected that interest rate and reserve requirement reduction may continue in the second quarter; (3) In the second quarter, there may still be some depreciation pressure on the US dollar against the RMB, and the US dollar has a phased top; (4) To achieve the 5.5% GDP target, we need to relax the real estate policy and monetary policy.
Risk tip: China's macroeconomic policy is not as expected; The reform of state-owned enterprises is less than expected; Monetary policy exceeded expectations; Covid-19 outbreak broke out again.