Market Review
The US dollar index fell slightly this week. The most exciting market trend occurred after the Federal Reserve cut interest rates by 50 basis points in the early hours of Thursday. The US dollar index showed a V-shaped trend, first falling sharply during the session and approaching the 100 integer mark, and then strongly recovered most of the lost ground. It fell again in the Asian session on Thursday.
Spot gold hit a new high this week. After the Fed’s interest rate decision on Thursday morning, the price of gold once hit $2,600, setting a new record high, but then plummeted by more than $50 to a weekly low of $2,546, and then gradually recovered to near a new historical high. Before the European session on Friday, gold broke through the 2,600 integer mark, setting a new high. As of press time, the highest was close to $2,620 per ounce.
In terms of non-US currencies, the USD/JPY rose overall. The Bank of Japan kept interest rates unchanged on Friday, but Governor Kazuo Ueda said there was room for policy adjustments. The dovish stance caused the USD/JPY to break through the 144 mark, up more than 1% on the day. The Bank of England paused its interest rate cuts this week and emphasized a gradual approach. The pound hit a two-and-a-half-year high against the dollar.
Due to the escalation of the situation in the Middle East and the pessimistic prospects of the ceasefire agreement between Israel and Kazakhstan, international oil prices rose overall this week. In addition, the impact of Hurricane Francine on oil production in the Gulf of Mexico in the United States overshadowed the market's continued concerns about demand, which also boosted the performance of oil prices. Both crude oil prices are expected to close higher for the second consecutive week.
As for U.S. stocks, despite the Federal Reserve's sharp interest rate cuts, U.S. stocks still closed lower on Wednesday, with the S&P ending its seven-day winning streak. However, U.S. stocks reversed on Thursday, with the S&P 500 index breaking through 5,700 points, setting the 39th record high since 2024 and expanding this year's gains to around 20%. The Dow Jones Industrial Average broke through 42,000 points, setting a new high.
Events of the week
1. The Federal Reserve boldly started the interest rate cut by 50 basis points!
The Federal Reserve started the interest rate cut cycle by 50 basis points, which is the first interest rate cut in the United States since March 2020. The dot plot shows that the Federal Reserve will cut interest rates by another 50 basis points this year and another 100 basis points next year, while Governor Bowman voted in favor of a 25 basis point cut.
Powell said at the press conference that future interest rate cuts could be fast or slow, or even suspended, depending on the actual performance of the economy; employment and inflation risks are balanced, and there are no signs in the economy that the possibility of a recession is increasing, but he has not declared victory in the fight against inflation. He also said that a 50 basis point rate cut should be seen as a commitment by the Fed not to fall behind the curve in the future, but 50 basis points should not be regarded as a normal range; he said that if the non-farm data for that month was obtained before the July meeting, interest rates might have been cut in July. When asked whether such a large rate cut would be made if the market did not expect a 50 basis point rate cut, Powell said that he would only consider the most beneficial approach to the economy.
In the summary of economic forecasts, the Fed lowered its GDP growth forecast for this year to 2.0%, raised its unemployment rate forecast for this year and next to 4.4%, and lowered its PCE and core PCE inflation forecasts for this year and next. Powell said that both the downside risks to inflation and the upside risks to unemployment have increased.
Former US President Trump said that the Fed's 50 basis point rate cut showed that "if they are not just playing politics, then the economic situation must be very bad to have cut so much". He also said that the Fed's rate cut was due to political considerations. Powell said at the press conference that the decision had nothing to do with political considerations. US Vice President Harris said that the Fed's decision was good news for Americans.
JPMorgan Chase correctly predicted a 50 basis point rate cut by the Fed this week, and Michael Feroli, the bank's chief U.S. economist, insisted that another 50 basis point cut would be made in November, but it also depends on the results of the upcoming employment report. Goldman Sachs believes that the bar for the Fed to increase rate cuts is low because the latest expectations for unemployment and PCE are very close to current levels. The bank expects another 75 basis points of rate cuts this year.
2. Trump is suspected of being the victim of another assassination attempt!
On the 15th local time, a shooting occurred near the golf club owned by former US President Trump in West Palm Beach, Florida. According to law enforcement sources, agents found a man carrying an AK-47 rifle near Trump's golf course. The Secret Service then exchanged fire with the suspect and fired at least four shots. But it is not clear whether the suspect fired the gun.
Trump was reportedly playing golf when the gunfire broke out. He was immediately put on a golf cart and taken to a safe place in the clubhouse. No one was injured. Trump responded by saying, "I'm fine. The Secret Service is doing a great job."
Musk responded to a question from a community user on the social media platform "X" titled "Why did they want to assassinate Trump?" He said no one was trying to assassinate Biden or Harris, and added a "thinking" emoticon. U.S. Vice President Harris said, "I am deeply disturbed by the possible assassination attempt against Trump today."
3. Pagers exploded in many places in Lebanon, and the situation between Lebanon and Israel has escalated significantly!
Lebanon suffered a communications equipment explosion, followed by a massive Israeli airstrike, which greatly increased the likelihood of a full-scale conflict and complicated diplomacy with Hamas. Senior U.S. officials said they did not expect Israel and Hamas to reach an agreement on a ceasefire and the release of hostages before the end of President Biden's term (next January).
A pager explosion occurred in Lebanon this week, killing 37 people and injuring 2,931. Beirut claimed that Israel was behind it, and Hezbollah vowed to take revenge. In a letter sent to the Security Council, the Lebanese Mission to the United Nations stated that according to preliminary investigations, the Lebanese authorities found that the communication devices that exploded had been implanted with explosives before arriving in the country, and were detonated by sending electronic messages to these devices.
In addition, the Israeli army dispatched dozens of fighter jets to launch a new round of air strikes on Hezbollah targets in Lebanon on the evening of September 19 local time, attacking more than 100 rocket launch sites belonging to Hezbollah, exacerbating the conflict between Israel and the Lebanese armed group Hezbollah at a time when all parties called for restraint.
In the Gaza war, the UN General Assembly passed a resolution requiring Israel to end its "illegal presence in the occupied Palestinian territories" within 12 months. However, although senior US officials have claimed for months that a ceasefire and hostage release agreement are imminent, they now privately admit that they do not expect Israel and Hamas to reach an agreement before the end of President Biden's term. The Biden administration said it would not give up seeking an agreement and continued to see it as the only way to end the Gaza war and prevent the rapid escalation of the conflict between Israel and Hezbollah in Lebanon.
4. LPR remains unchanged in September, downward trend may still be expected in the fourth quarter
The September loan prime rate (LPR) was released as scheduled. The People's Bank of China kept the one-year and five-year loan prime rates (LPR) unchanged at 3.35% and 3.85%, respectively.
Analysts said that after the Fed's interest rate cut, the gap between China and the United States narrowed, the pressure on the depreciation of the RMB exchange rate eased, and the operating space of my country's monetary policy expanded, but it does not mean that the central bank must cut interest rates immediately. Industry insiders also said that considering multiple factors such as promoting domestic demand and improving quotation quality, the LPR may continue to decline this year, and the existing mortgage interest rate may also be reduced.
5. Bank of England keeps interest rates unchanged
On Thursday, the Bank of England kept its base rate unchanged at 5.00% by an 8:1 vote, with no one voting for a rate hike. Most members of the Monetary Policy Committee believed that a gradual reduction in interest rates was reasonable. Bank of England Governor Bailey pointed out that caution was needed and that interest rates should not be cut too quickly or too much.
The Bank of England said that wage and price trends have continued to normalize, and the labor market remains loose, but still tight by historical standards. Quantitative tightening is progressing smoothly, and no evidence of damage to market functioning has been found. Staff lowered their expectations for third-quarter GDP and inflation levels by the end of the year, and reiterated that monetary policy needs to remain tight for a long enough time until inflation risks subside.
6. Bank of Japan pauses rate hike, citing rising inflation expectations
On Friday, the Bank of Japan voted unanimously to keep its benchmark interest rate at 0.25%, in line with market expectations. In its statement, the Bank of Japan said that inflation expectations have risen moderately and that inflation is expected to be roughly in line with the Bank of Japan's price target over the three-year forecast period. Consumption is showing a moderate upward trend, and Japan's economy is recovering modestly, and despite some weaknesses, the economy is likely to achieve growth above potential.
In addition, the Bank of Japan also stated that the impact of foreign exchange fluctuations on prices has become greater than before, and we must be vigilant about the impact of financial market and foreign exchange market fluctuations on the Japanese economy and prices. Governor Kazuo Ueda pointed out that if economic development meets expectations, interest rates will continue to be raised and the impact of interest rate hikes will be closely monitored, but this does not necessarily mean that the pace of future interest rate hikes should be slowed down.
7. Many rural financial institutions lowered their deposit interest rates
On the eve of the Mid-Autumn Festival, many rural financial institutions, including Ningwu Ruidu Village Bank, Laibin Xiangzhou Changjiang Village Bank, Xincheng County Rural Credit Cooperative, and Mengyin Qifeng Village Bank, lowered their personal RMB deposit rates, with some institutions lowering by as much as 55 basis points. In addition, since the loan market benchmark rate (LPR) was lowered on July 22, some banks have adjusted their deposit rates for the second time, mainly for lump-sum deposits of one year or more.
8. Hong Kong Exchanges and Clearing Limited: Severe Weather Trading to be Implemented from September 23, 2024
The Hong Kong Stock Exchange announced that according to the consultation conclusions issued on June 18, 2024 and the notices on July 15 and August 2, the exchange has obtained regulatory approval to implement severe weather trading. Severe weather trading will take effect on September 23, 2024. Securities trading will proceed as usual on severe weather trading days, and all exchange participants need to continue to provide trading-related services during severe weather. The exchange strongly recommends participants to use remote working mode and online services.
9. Apple iPhone 16 sales may not be optimistic
Ming-Chi Kuo, an analyst known for accurately predicting the sales trends of Apple's new products, said that judging from the first weekend's pre-orders, the market demand for the iPhone 16 Pro series was lower than expected. Kuo expects the iPhone 16 series to sell 37 million units in the first weekend, a year-on-year decrease of 12.7%. One of the possible reasons for the lower-than-expected demand is that Apple Intelligence, the biggest selling point, could not be launched with the iPhone 16. In addition, fierce competition in the Chinese market continues to affect iPhone demand.
At 8 am on September 20, Apple's iPhone 16 series was officially released in major Apple stores. At 10:08 am on the same day, Huawei's Mate XT was also officially released. "Scalpers" said they would only accept iPhone 16 Pro Max with a 200 yuan increase, but said they would not accept it that afternoon. Huawei's three-fold screen mobile phone was sold out in seconds, and "scalpers" said they could not accept it even if they increased the price by 20,000 or 30,000 yuan.
The article is forwarded from: Jinshi Data
