A Week In Review: Volatility In Hong Kong, Growth In US, And Mixed Signals In Fixed Income

Hong Kong Stock Market

The Hong Kong stock market experienced another week of volatility, with the index failing to break through the resistance at 18,000 points and returning to the intersection of the 17,500-point moving average, forming a pattern of repeated tug-of-war. The US stock market remains strong and continues to rise, but the stimulus for the Hong Kong stock market is clearly insufficient. The A-share market also shows a similar pattern of back-and-forth movements, without clear signs of stabilization and strength. Although some macro policies have been introduced, their impact on the market only lasted for a day or two, and the pulse-like market conditions have led to sustained weakness. Looking ahead to next week, there is still no clear direction at the index level, and the current pattern will continue to test the support level at 17,500 points. Even if it holds steady, there will still be a pattern of volatile tug-of-war. In terms of the market, due to the insufficient overall trading volume, coupled with differentiation and lack of sustainability, it is feared that the market will continue to fluctuate with pulses as the main trend, with most hotspots concentrated in individual stock trends.

US Stock Market

The three major indexes fluctuated upward last week, reaching a small high. On the one hand, it is supported by economic data, although there are signs of weakening in the job market, but inflation continues to decline. Specifically, the weekly initial jobless claims in the United States rose from 218,000 in the previous week to 231,000, falling short of expectations for four consecutive weeks; the New York Fed survey showed that the inflation expectations for the next year in October fell from 3.7% in September to 3.6%, indicating a slight decline in short-term inflation expectations in the market. In this way, the probability of the Federal Reserve raising interest rates in December has been lowered again; on the other hand, the US stock market's third-quarter earnings season is nearing its end, but the performance is currently stable. Bloomberg data shows that as of last week, over 90% of S&P 500 index component companies have released their earnings reports, with 48% of companies exceeding revenue expectations. It is expected that next week, as the Federal Reserve's December interest rate meeting approaches, the index market may be affected by certain emotional fluctuations, but it is still suitable for diversified layouts.

Fixed Income Market

Last week, US economic data showed mixed performance, and the minutes of the Federal Reserve meeting showed that policymakers remain cautious about adjusting monetary policy in the face of upward inflation risks. Based on Taylor's rule, the interest rate guidance has narrowed the gap with the target interest rate of the Federal Reserve in recent times, supporting the view of pausing rate hikes. Despite the possibility of a soft landing, based on current economic data, economists' recession probability models show that there is still a probability of more than half that the United States will experience a brief recession. With the cooling of inflation taking effect, the market generally expects that the Federal Reserve will not further raise interest rates this year. In the bond market, as the United States enters the traditional holiday season last week, market trading is relatively light and the volatility of yields at various maturities is not significant. However, as US consumer inflation expectations reach record highs, the yield on two-year Treasury bonds has increased significantly, leading to a steepening of the yield curve last week and a deepening of the inversion between the two-year and ten-year yields.

Author: Eddid Securities and Futures Research Department

The content contained is provided for reference only and does not constitute a distribution, an offer to sell or a solicitation of an offer to buy any securities. This content has been prepared without regard to the individual investment objectives, financial position or special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in the content. The value of, and returns from, any investments contained in the report are uncertain and are not guaranteed and may fluctuate because of their dependence on the performance of underlying assets or other variable market factors. The content and information contained are prepared and interpreted based on publicly available information collected from reliable sources. EDDID has exerted every effort in its capacity to ensure, but not to guarantee, their accuracy, completeness, timeliness, or correctness. You should not make any investment decision solely based on this content, EDDID shall not be liable for any loss, damage, or expense whatsoever, whether direct or consequential, incurred in relying on the information contained in this content. Any form of unauthorized distribution, reproduction, publication, release or quotation is prohibited without EDDID’s written permission or it is possible to violate relevant regulations. This content should not be copied or repost in Mainland China.