Weekly Market Recap: Volatility In Hong Kong, US Earnings Surge, Fed Influences Bonds

Hong Kong Stock Market

Last week, the Hong Kong stock market fell first and then shook, although HSI did not break the key support point of 15500 points, the structure still showed a weak pattern. The peripheral European, American, Asian Pacific, and other stock markets are relatively strong. Powell also said that a rate cut this year is appropriate. But for A-shares and Hong Kong stock market, it did not provide any support at all. Under the low economic expectation environment and the continuous weak mentality, major market indices of A-shares still recorded a new low, dragging the Hong Kong stocks lower. Looking ahead to this week, HSI still needs to test the 15500 point support. If it fails, the pressure of weakness will further increase. Considering the approaching Chinese Spring Festival, under the pressure structure, the space and probability of market participation are low.

US Stock Market

Last week, the US stock market opened higher and then lower, and the index closed with a long positive line above the EMA20 day average line last Friday. The overall trend has not changed yet, and the monthly Candlestick chart has broken through the previous high point. In terms of sectors, consumer staples rose 3.23%, utilities rose 2.54%, and healthcare rose 2.09%. On the macro level, the US Federal Reserve remained interest rate unchanged in January. Powell also stated that the interest rate cut in March was too early. The rising expectations of interest rate cuts were suppressed, coupled with the US stock technology companies' actual earnings being lower than expected, and major market indices fell. However, according to FactSet statistics, as of the end of January, 25% of companies have announced their actual earnings for 2023Q4, of which 69% have announced higher than expected actual earnings per share. The positive effect in earnings season can be expected. As the direction of interest rate cuts was determined, looking ahead to this week, the earnings season is still the theme of the US stock market. If the index can stand on the current EMA20-day average line, the possibility of continuing to rise is higher.

Fixed Income Market

The Federal Reserve's first rate decision of the year landed, with the federal funds rate remaining unchanged, in line with market expectations. However, Powell hinted afterward that a rate cut in March is unlikely, sending a hawkish signal that has impacted expectations of rate cuts in the coming months. Despite the hawkish signal from the Fed, bond trading has diverged. On the one hand, the derivatives market has increased its bets on a larger rate cut this year. On the other hand, regional bank operating risks have re-intensified risk aversion, with some investors worried that a longer period of high rates will further amplify the pressure on the economy's operation, leading to the buying of government bonds for risk hedging. At the same time, after the US Treasury increased its quarterly issuance scale, it stated that it would no longer increase the issuance scale of long-term bonds next year. The news reversed the market expectation of long-term US bonds being in excess supply, driving long-term bond prices across the board. In terms of maturity structure, long-term rates fall sharply compared to short-term rates, with long-term rates including the 10-year falling by more than 22BPs.

Author: Eddid Securities and Futures Research Department

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