Global Markets in Flux: Hong Kong's Volatility, US Labor Data Anticipation, and Bond Market Pressures Shape Economic Outlook

Hong Kong Stock Market

The Hong Kong stock market had been fluctuating and falling repeatedly last week. Although it had not formed a pattern of breaking through and falling, the trend had shifted from the previous upward pattern of volatility to a pressure-bearing trend. In terms of US stocks, last week had also been under pressure and lower, and A-shares had not formed a clear rebound, resulting in Hong Kong stocks falling. However, the market is actively speculating on high-yield sectors such as water, electricity and coal, so the overall market is not as weak as the index. Looking ahead to this week, we need to observe whether the index can continue to support the volatility and form a recovery. If not, the next support point will be 16300. In terms of the market, there will still be trading opportunities under the volatile pattern, otherwise this momentum will be weaken and intensify repeatedly.

US stock market

Last week, the US stock market opened low and continued to decline. The Labor Department's December employment data to be released last Friday is highly anticipated by the market. The market expects the unemployment rate to rise from 3.7% in November to 3.8%, employment growth may slow down, and the annual wage increase may slow down for the first time to below 4%. The loose labor market conditions may consolidate the market's expectations of a rate cut in March. The flexibility of the labor market once supported consumer spending, avoiding a recession in 2023 and is expected to continue to grow in 2024. Employment growth in the past few months has been concentrated in a few industries, including leisure, hotels and healthcare. Looking ahead to this week, based on the weakening of last week's sell-off, Friday's non-farm payroll report data may become the expectation that affects the Fed's policy and the early 2024 interest rate trend, and these two expectations will become the key factors affecting market sentiment.

Fixed income market

Last week's non-farm data exceeded expectations and initial jobless claims declined, putting short-term pressure on the debt market. On the other hand, the Federal Reserve released the latest monetary policy meeting minutes. The content showed that the Federal Reserve was concerned about the lagged effect of monetary policy and expected that economic growth in the next two years may be lower than the long-term equilibrium. With the economic slowdown, signs of softening inflation and labor markets may increase. Overall, the Federal Reserve's expectation management deepened the market's view of the peak of interest rate hikes, but no more dovish signals were released, cooling the previously overly optimistic expectations of rate cuts. In terms of term structure, the multi-cycle yield has risen synchronously this week, with the curve trending towards a bear market and steepening.

Author: Eddid Securities and Futures Research Department

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