Market Review
The US dollar index turned positive after a slight decline at the beginning of this week. After three consecutive days of decline, the US dollar index began to rebound on Wednesday. During the European session on Friday, the US dollar index broke through 108 for the first time since November 2022. The market generally believes that Trump's coming to power will boost the US dollar, and the weakening of the Fed's expectations of interest rate cuts next year further supports the US dollar trend.
Spot gold rose for five consecutive trading days this week, returning to above $2,700 an ounce on Friday, and is expected to achieve its best weekly performance in at least a year. The increased uncertainty of the Russia-Ukraine conflict has reignited safe-haven demand, while investors are waiting for key signals on the prospect of a rate cut by the Federal Reserve, all of which have helped boost gold prices.
In terms of non-US currencies, the euro fell sharply against the US dollar for three consecutive weeks, breaking the 1.04 mark on Friday for the first time since December 2022, due to weak eurozone PMI data. Traders believe that there is a 50% chance that the European Central Bank will cut interest rates by 50 basis points in December; the pound sterling against the US dollar was also under pressure from the strong dollar and fell to its lowest level since April this year. The US dollar against the yen has been volatile this week and is expected to close higher for the third consecutive week.
International crude oil prices rose overall this week as the market worried that the escalation of the conflict between Russia and Ukraine would affect crude oil supply. The oil production at Norway's largest oil field, Sverdrup, was temporarily stopped and then resumed in time, limiting the rise in crude oil prices. In addition, three OPEC+ sources familiar with the discussions said that due to weak global oil demand, the organization may postpone its production increase plan again at its meeting on December 1.
In terms of digital currency, Bitcoin surged this week, setting a new record. As of press time, it is only one step away from the $100,000 mark. In terms of news, the Trump team is reportedly considering establishing the first White House cryptocurrency position in history. SEC Chairman Gensler, who targets the cryptocurrency industry, plans to step down in January next year. The total assets of 12 Bitcoin ETFs have exceeded $100 billion within 10 months of listing.
In terms of U.S. stocks, Nvidia released its third-quarter earnings report after the market closed on Wednesday. Although the performance was better than expected, the fourth-quarter revenue outlook was lower than the market's highest expectations, causing the stock to fall 5% after the market closed. However, the stock price rebounded on Thursday and hit an all-time high, with a total market value of nearly $3.7 trillion.
Note: Quotes updated as of 21:00 on November 22.
Institutional perspectives
Goldman Sachs' 2025 Outlook report predicts that the MSCI China Index and the CSI 300 Index will rise by 15% and 13% respectively in 2025, mainly due to earnings per share growth and moderate valuation growth. In addition, Goldman Sachs expects that the US dollar will "strengthen for a longer period of time" driven by Trump's tariff policy, and its CEO expects that the policies implemented by Trump after taking office will make the capital market more active in 2025.
The Fed's rate cuts may enter the "slow lane". CICC believes that the rate will be cut by 25 basis points in December this year, and by 25 basis points in the first and second quarters of 2025, and then stop cutting interest rates. BlackRock CIO also said that the Fed will cut interest rates by 25bp next month, and there will be two or more cuts next year.
Ken Griffin, founder of Citadel Investments, said the era of explosive growth in multi-strategy hedge funds is over.
Pimco said that given the prospect of the Federal Reserve's interest rate cuts, U.S. Treasuries, which have fallen sharply recently, are attractive investments and the yield curve is expected to steepen.
Events of the week
1. Ukraine used US and British missiles against Russia for the first time, and Russia expanded the scope of its nuclear weapons use
The Biden administration lifted restrictions on Ukraine using US-made weapons to attack targets in Russia, a major change in US policy in the Russia-Ukraine conflict. Subsequently, Ukraine launched US-made and British-made missiles at Russia for the first time. Russia responded by revising its nuclear policy to allow for a wider range of nuclear weapons and launching a new medium-range hypersonic missile at Ukraine that can reach speeds of Mach 10 and cannot be intercepted.
On Tuesday, Ukrainian forces used the U.S. Army Tactical Missile System (ATACMS) for the first time to strike a Russian arsenal in Russia's Bryansk Oblast. Russia said the anti-missile system shot down five of the six missiles fired. On Wednesday, Ukraine reportedly fired British Storm Shadow missiles at Russia.
On the Russian side, Putin signed a revised nuclear policy on Tuesday, indicating that if Russia is attacked conventionally by a nuclear power, it may consider using nuclear weapons in response. This move has caused widespread concern and led to a rise in safe-haven assets. However, the United States sees no reason to adjust its nuclear posture.
Five sources familiar with the Kremlin's thinking said Putin was open to discussing a ceasefire in Ukraine with Trump but ruled out any major territorial concessions and insisted that Kiev abandon its ambitions to join NATO. Biden's move to allow Ukraine to use U.S.-made missiles to strike deep into Russia could complicate and delay any solution, however.
2. Trump is still searching for a candidate for Treasury Secretary. Is Kevin Walsh the best candidate?
The latest news on Friday said that Trump is reportedly interested in letting financier Kevin Warsh serve as Treasury Secretary first, and then take over as Federal Reserve Chairman after Powell's term ends in 2026.
Kevin Warsh is a former member of the Federal Reserve Board and former White House economic adviser. He has supported free trade, Federal Reserve independence and a strong dollar, which conflict with some of Trump's views. His father-in-law is Trump's friend for many years. He holds a complex stance on trade protectionism, has experience in dealing with market turmoil, can communicate with the market, and is often considered a possible candidate for the Federal Reserve Chairman.
In addition, other popular candidates include Marc Rowan, CEO of private equity giant Apollo Global Management, which manages nearly $700 billion in assets and has made political donations to Trump; Scott Bessent, founder of hedge fund Key Square and former executive of Soros Fund, who strongly supports tariffs, calls for a thorough reform of bank supervision and "preservation" of the dollar; Bill Hagerty, a Republican senator from Tennessee, former ambassador to Japan and a private equity investor; Robert Lighthizer, who served as U.S. trade representative during Trump's last term. Currently, only one think tank supports Lighthizer as Treasury Secretary.
3. Fed officials’ speeches revealed a cautious stance on rate cuts
The number of initial claims for unemployment benefits in the United States unexpectedly fell by 6,000 to 213,000 last week, suggesting that non-farm payrolls growth may rebound in November after a sudden slowdown last month due to hurricanes and strikes, which may determine whether the Federal Reserve will cut interest rates again in December.
Currently, the CME Fed Watch tool shows that the probability of a 25 basis point rate cut in December is less than 60%. The speeches of Fed officials generally reveal a cautious stance on rate cuts.
Collins, a 2025 FOMC voter and president of the Boston Fed, said more rate cuts are needed, but policymakers should be cautious and avoid moving too fast or too slow. She reiterated that interest rates are not on a preset track and prefers a gradual approach. Fed Governor Bowman also hopes to be cautious about further rate cuts, believing that progress in reducing inflation has slowed.
Chicago Fed President Goolsbee, a 2025 FOMC voting member, said interest rates will "come down significantly," while expressing confidence that inflation is moving toward the Fed's target and that the labor market is in solid shape.
Fed Governor Cook believes that the Fed is likely to lower interest rates to a more neutral stance over time, citing inflation progress and a solid labor market. She expects both overall and core inflation to fall to 2.2% next year, and the slowdown in wage growth will further strengthen her confidence in continued low inflation.
Jeffrey Schmid, a 2025 FOMC voting member and president of the Kansas City Fed, said that although the Fed's first rate cut was a vote of confidence that inflation was returning to its 2% target, it remained uncertain how far rates could fall.
As for the potential impact of Trump's policies, Richmond Fed President Barkin pointed out that the Fed should not preemptively adjust monetary policy in advance of possible changes in economic policy.
4. Hezbollah said the ceasefire proposal was waiting for Israel's response, and the Security Council's Gaza ceasefire resolution was vetoed by the United States
Lebanon submitted a written response to the US ceasefire proposal on Monday. This is the most serious attempt to end the conflict so far. Lebanese Hezbollah leader Naim Qassem said on Tuesday that Hezbollah has expressed its position on the draft ceasefire agreement proposed by the United States, which is consistent with the Lebanese government's view, and now the decision is in Israel's hands.
In addition, on November 20, local time, the UN Security Council voted on a ceasefire resolution in Gaza proposed by 10 non-permanent members. Due to the veto of the United States, the resolution failed to pass. The other 14 countries of the Security Council voted in favor. Since the outbreak of this round of Palestinian-Israeli conflict, the United States has exercised its veto power six times in the Security Council on the Palestinian-Israeli issue, five of which were to block the ceasefire in Gaza.
5. The International Criminal Court issues an arrest warrant for Netanyahu and others
The International Criminal Court (ICC) in The Hague has issued arrest warrants for Israeli Prime Minister Benjamin Netanyahu, former Defense Minister Galant and Hamas leader Al Masri for "crimes against humanity and war crimes." Netanyahu's office issued a statement saying: "Israel rejects the absurd and false actions and accusations of the ICC. No anti-Israel decision will prevent Israel from protecting its citizens."
The move is a major escalation in the legal battles in the Gaza war. Many of Israel's Western allies, including Britain, France, Germany and Canada, are signatories to the ICC, meaning they are obliged to arrest the three men if they visit those countries, but there is no provision forcing them to do so.
The United States, Israel's main supporter, is not a signatory to the court and refuses to accept its authority. U.S. President Joe Biden said the ICC prosecutor's decision to apply for an arrest warrant was "outrageous." Rep. Michael Waltz, Trump's pick as national security adviser, said the court had "no credibility."
6. Well-known American lawyer impeaches Biden and calls for avoiding triggering "World War III"
According to foreign media reports, Dr. Francis Boyle, a well-known American lawyer and former senior UN war crimes prosecutor, wrote an impeachment bill against Biden and called on Americans to use it to avoid World War III.
The impeachment bill states that while serving as President of the United States, Biden violated his constitutional duties and took non-neutral, belligerent, and warlike actions against Russia without the express authorization of the United States Congress, violating the war powers clause of Article 1, Section 8 of the United States Constitution, causing great damage to the law and justice, and causing obvious harm to the American people. Therefore, Biden is guilty of high crimes and misdemeanors, and it is necessary for him to be impeached, tried, and removed from office.
7. IAEA: Iran agrees to stop producing enriched uranium close to making nuclear weapons
Iran has agreed to stop producing enriched uranium close to the levels needed to build nuclear weapons, according to United Nations inspectors on Tuesday. Observers said Iran had begun implementing measures "designed to stop the increase of its stockpile" and engineers had taken the necessary initial steps to limit output. Iran began enriching uranium in 2021 at up to 60% concentration, material that can be quickly upgraded to 90% levels for use in nuclear weapons.
Analysts said the move indicated that Iran may be ready to resolve the deadlock with the West over its nuclear issue.
8. Bank of Japan Kazuo Ueda: Will seriously consider the impact of exchange rates on the economy and prices
Bank of Japan Governor Kazuo Ueda said this week that the central bank will "carefully" consider exchange rate changes when compiling economic and price forecasts. On monetary policy, Ueda reiterated that the Bank of Japan will make decisions "meeting by meeting" based on available information. He noted that there is still a month to go before the Bank of Japan's next policy meeting in December, when there will be more information to digest.
Separately, government documents showed Japan was considering spending 13.9 trillion yen ($89.7 billion) from its general account to finance a new economic stimulus package aimed at mitigating the impact of rising prices on households. The package also includes about 8 trillion yen in government investment and loans and local government spending, bringing the total to 39 trillion yen if private funds are included, the documents showed. The figures were also confirmed by three other government and ruling party sources.
9. Beijing, Shanghai, Guangzhou and Shenzhen have all cancelled the standards for ordinary residential and non-ordinary residential
Shanghai, Beijing, Shenzhen and Guangzhou have successively announced that they will cancel the standards for ordinary residential and non-ordinary residential properties from December 1, 2024. The value-added tax on individual housing sales and the deed tax on individual housing purchases will be implemented in accordance with relevant national regulations.
In terms of value-added tax, individuals who sell houses purchased for more than 2 years (including 2 years) are exempt from value-added tax. Individuals who sell houses purchased for less than 2 years are required to pay the full amount of value-added tax at a rate of 5%.
In terms of deed tax, for individuals who purchase their family's only residence, if the area is 140 square meters or less, the deed tax rate is reduced to 1%; for an area of more than 140 square meters, the deed tax rate is reduced to 1.5%. For individuals who purchase their family's second residence, if the area is 140 square meters or less, the deed tax rate is reduced to 1%; for an area of more than 140 square meters, the deed tax rate is reduced to 2%.
In addition, Guangzhou will purchase existing commercial housing with an area of less than 90 square meters across the city as affordable housing, and is planning a new policy for household registration, allowing people to settle down in the city after purchasing a house and paying social security for one year.
10. Trump reportedly plans to enter the cryptocurrency trading platform and consider developing encrypted payment services
Two people familiar with the negotiations said that Trump Media and Technology Group is close to acquiring cryptocurrency trading platform Bakkt in an all-stock deal. Boosted by the news, the U.S. stock BKKT rose by more than 120% and triggered a circuit breaker.
According to the New York Times, according to a trademark application filed this week, Trump Media Technology Group submitted an application for a cryptocurrency payment service called Truth Fi, describing it as a platform for crypto payments, financial custody services and digital asset transactions.
11. The 6 trillion yuan debt limit has been issued to various places, and some provinces have started issuing
Since the Ministry of Finance announced the "10 trillion +" debt reduction plan on November 8, governments in many places are accelerating the issuance of a new round of bonds to replace existing implicit debts. According to data from the China Bond Information Network, as of November 18, five provinces and cities, including Henan Province, Guizhou Province, Jiangsu Province, Dalian City and Qingdao City, have disclosed their plans to issue special refinancing special bonds, with a total issuance amount of 224.4 billion yuan.
According to reports, the Ministry of Finance is currently organizing and implementing the decisions and arrangements of the CPC Central Committee and the State Council, strengthening policy guidance to local governments, making good use of the 6 trillion yuan local government debt limit, and better exerting the incremental policy effect. Some provinces have already started the issuance work to speed up the implementation of the policy.
12. Large-scale broad-based stock ETFs reduce fees, and financial management companies start a fee reduction war
On the evening of November 19, the official websites of several fund managers including Hua Xia, Huatai-PineBridge, E Fund, Harvest, Southern, and Hua An announced that they would reduce the management fee and custody fee of their large-scale broad-based ETFs. Among them, the management fee rate was uniformly reduced to 0.15%, and the custody fee rate was uniformly reduced to 0.05%. It is reported that the broad-based ETF products with reduced fees this time involve core broad-based indexes such as CSI 300, SSE 50, CSI 500, CSI 1000, and Sci-Tech Innovation Board 50. Based on the current scale, it can reduce the holding cost for investors by about 5 billion yuan each year.
As the year draws to a close, financial management companies have also launched a war of reducing fees in order to attract customers. Bank of China Wealth Management, Bank of Communications Wealth Management, China Merchants Bank Wealth Management, Minsheng Wealth Management, Everbright Wealth Management, Huaxia Wealth Management and many other bank wealth management companies have issued notices on preferential rates, reducing fees for many of their products in stages, and even implementing "0 fees" for some wealth management products in stages.
13. The Central Air Traffic Control Commission will soon launch eVTOL pilots in six cities
On November 18, Sun Weiguo, director of the General Aviation Business Department and the UAV Working Committee of the China Air Transport Association, revealed at the 2024 International Electric Aviation (Kunshan) Forum that the Central Air Traffic Control Committee will soon carry out eVTOL pilots in six cities. The six pilot cities are initially determined to be Hefei, Hangzhou, Shenzhen, Suzhou, Chengdu, and Chongqing. The pilot document has relevant plans for routes and regions, and authorizes some local governments to control airspace below 600 meters, which means that relevant local governments have to bear more management responsibilities. After the news came out, the A-share low-altitude economic sector moved abnormally, and related stocks rose rapidly.
14. SpaceX Starship splashes down at sea, completing its sixth test flight
This week, SpaceX's new generation heavy-lift rocket "Starship" conducted its sixth test flight in Texas. "Starship" did not enter orbit, but flew along a suborbital path as designed. About 3 minutes after the launch, SpaceX announced that the tower or booster did not pass the capture standard and gave up the "chopsticks to grab the rocket" method to recover the first-stage super-heavy booster. In the end, about an hour after the launch, "Starship" successfully landed in the Indian Ocean.
Article forwarded from: Jinshi Data
