A Week In Review: Global Financial Markets Rocked By Inflation And Interest Rate Concerns

Hong Kong Stock Market

Hong Kong stocks surged and fell last week, with the index reaching a maximum of 18,300 points. Although it recorded a sharp fall on Friday, it still gained a red disk last week. Prior to the Federal Reserve's September CPI and other data released on Thursday, the Hong Kong stock market continued to rebound and rebound due to the decline in long-term US debt yields, the dollar fell back to the yuan, Chinese stocks continued to rise, and the influence of dovish remarks on the minutes of the Federal Reserve meeting. As the CPI exceeded market expectations on Thursday, the market's expectations for the Federal Reserve to raise interest rates again this year have also dragged down the stock market. Looking forward to next week, although the index has not fallen below the short-term moving average, after the large fluctuations, the trend of short-term rebound has changed. It is expected that the probability of the index continuing to fluctuate widely will increase, and the volatility will be concentrated at the level of 17600-18000 points. At the market level, it mainly tests the problems undertaken by the sector, but under the shock pattern, the situation of expected differentiation is prominent.

US Stock Market

The strength of the newly released September US CPI data has weakened the positive sentiment caused by several Fed officials who have recently stated that they may not need to raise interest rates anymore, and has also added to the uncertainty of interest rate policy for the rest of 2023. Under this incentive, market sentiment fluctuated, and the yield on US 2-year Treasury bonds once again crossed the threshold of 5%; Yields on 10-year US debt soared nearly 15 basis points. US stocks also entered the diving market. The three major indexes fluctuated violently and once fell more than 1%. The strong effect of US CPI data, superimposed by the conclusion that the global inflation just released by the IMF will remain high until 2025, it is expected that the US stock market will continue to be shrouded in negative expectations of strong inflation and strong interest rate hikes next week.

Fixed Income Market

Earlier last week, the risk aversion brought by the Palestinian-Israeli conflict led to a recovery in the Treasury market, but as the US September inflation data released on Thursday exceeded expectations, bond market trading quickly weakened. Although Fed officials have recently released dovish signals, the data shows that the cooling of inflation still faces severe challenges, and economic data performance may prolong the tight monetary environment. After the data was released, both the stock market and the bond market were under pressure. At the same time, the auction of 30-year Treasury bonds was cold, driving the Treasury interest rate curve to quickly become steep. In terms of maturity structure, the bull market of the Treasury yield curve last week has become steeper, the yield of long-term Treasury bonds has dropped significantly, and the inversion of ten-year and two-year Treasury bonds has deepened.

Author: Eddid Securities and Futures Research Department

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