01, US Stock Market Decline

When the CPI was just released last week, the US stock market went into a frenzy, and I pointed out at the time that this was just an emotional venting. Since then, the market will gradually return to calm.

In the past two days, I have seen some investment banks' research on US inflation data, and it is clear that they have returned to objectivity. They no longer make decisions based solely on emotions as before, so the US stock market has returned to its familiar pattern.

Last night, the Dow Jones Industrial Average opened low and went high, but don't think that the US stock market is going to rise again.

At 2:30 in the morning, as the US stock market was about to close, it suddenly plummeted, and it closed at the lowest point of the day. From the high of 33,964 points during the trading day to the closing of 33,536 points, the maximum drop exceeded 400 points.

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The drop in the Nasdaq Index was even greater, reaching 1.12%.

The European stock markets that closed earlier were basically all up, with the UK up 0.9% and Germany up 0.6%.

Yesterday during the day, most of the Asian stock markets also rose, so last night's US stock market can be said to have started an independent decline.

02, Renminbi

On the other hand, the renminbi continued to rise, with the maximum increase exceeding 900 points during yesterday's trading.After 16:20 Beijing time, the offshore exchange rate of the Chinese yuan against the US dollar experienced a certain decline, but by 23:00 in the evening, the yuan exchange rate strengthened again. Ultimately, by the time of closing, the exchange rate returned to 7.04.

Compared to the previous low of 7.37, the yuan has appreciated by 3300 points in just over a week.

At the same time, a large amount of capital is pouring into the A-share market, with 14.7 billion yuan flowing in from the north on last Friday, followed by another 16.6 billion yuan on this Monday.

While capital is flowing out of the US stock market, it is flowing into the A-share market, indicating that Chinese assets are more popular.

03, Inflation

In fact, the market's interpretation of the US CPI data was overly idealistic.

Now, the main interpretation of the decline in CPI appears more objective.

Firstly, it is due to the high base in the second half of last year, which has led to a lower year-on-year growth rate of CPI this year compared to last month. We have previously emphasized this point in our articles.

The second reason for the decline is that the prices of some products have indeed fallen, such as the significant drop in the prices of durable goods.

This is related to the continuous rise in US prices, which has squeezed the consumption expenditure of ordinary families. For example, after Americans have paid a large amount for energy and food consumption, their enthusiasm for changing cars has decreased compared to before, which directly led to a nearly one percentage point month-on-month decline in the price of used cars.Other durable consumer goods are in a similar situation.

In addition, we have observed that in some analyses, the core consumer price index (CPI) was mentioned. After excluding energy and food, the core CPI rebounded in the first two months, which is actually closely related to the fact that rent has not significantly decreased.

However, rents in the United States have already shown a certain degree of decline, but there is a certain lag between the CPI's measurement of rent and the changes in market rents. Looking at the average lag in the past, it is very likely that the core CPI will start to decline in the first quarter of next year.

In other words, although the release of this CPI has excited the market, what the Federal Reserve will do still depends on more inflation data.

Before the next Federal Reserve meeting, there is still the core CPI to be announced, as well as employment data. The Federal Reserve is likely to continue raising interest rates firmly, but it is still difficult to determine when the end point will be.

Fluctuations in U.S. stocks and bonds will continue.