A Week In Review: Hong Kong And US Markets, Fixed Income Trends

Hong Kong Stock Market

The Hong Kong stock market showed a weak trend last week, with a 3.6% decline after repeated fluctuations throughout the week. As the situation in the Middle East worsens, market expectations for the global economic impact caused by the dispute have increased. In addition, the resilience of the US economic data has also led to market expectations of a chance of interest rate hikes by the Federal Reserve this year, further stimulating the rise in US long-term bond yields and putting pressure on US stocks. At the same time, A-shares also experienced continuous outflows of funds, leading to a decrease in market sentiment and a drop below the key level of 3000 points. Under the negative pressure from both domestic and international markets, the Hong Kong stock market is unable to stand alone and continues to decline, exacerbating the weak trend. Looking ahead to next week, the index level will still be weak and fluctuate downward, testing the support near the bottom. The market only has individual stock trends, but the space and profit available for participation are low.

US Stock Market

September non-farm employment data remains strong, exceeding market expectations and marking the largest increase since January 2023. Among them, employment positions in the leisure and hotel industry, government, healthcare, professional, technology services, and social assistance have increased. The strong economic data helps alleviate market concerns about an economic recession and paves the way for a stable and optimistic future outlook for the US economy. However, under this boost, it cannot be ruled out that the Federal Reserve may still insist on raising interest rates once before the end of this year. Under this expectation, US bond yields and the US dollar continue to be strong, suppressing the US stock market. At the same time, the Israeli-Palestinian conflict continues to disrupt market trends. With the rise in oil prices, inflation pressure expectations are also forced to rise. It is expected that there will still be a wave of disturbances in market sentiment next week before the Federal Reserve interest rate meeting.

Fixed Income Market

The economic data released last week continues to support the prospect of tightening, even as conflicts in the Middle East intensify. Investors seem to prefer choosing crude oil and gold as geopolitical risk hedging tools. In the case of sluggish government bond auctions, the sell-off in the US Treasury market has intensified. However, Powell's speech before the blackout period has led the market to anticipate that the Federal Reserve will not further raise interest rates, which has significantly boosted the short-term bond market. In terms of term structure, long-term bond yields have risen sharply last weekthe increase in short-term bond yields is relatively small, and the degree of yield curve inversion has significantly eased.

Author: Eddid Securities and Futures Research Department

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