Last night, Federal Reserve Chairman Powell issued a warning to the bond market at the Wall Street Journal’s Jobs Summit. Powell said the reopening of the economy could “put some upward pressure on prices” and acknowledged that the recent rapid rise in U.S. bond yields has caught his attention, but said the Fed would need to see a bigger rise before taking action. Powell also emphasized that the economic recovery may push up inflation, but that is a temporary rebound and the Fed will “wait patiently” before changing policy.
Powell also said that he would be concerned if market conditions were disorderly or if financial conditions continued to tighten, threatening the achievement of inflation and employment goals.
Affected by Powell’s speech, the U.S. ten-year Treasury bond yield exceeded 1.5% on Thursday, rising as high as 1.548%, close to the high of 1.6% set last week, and gold futures fell Breaking the $1,700/ounce mark. As of the close early this morning, the yield on the U.S. ten-year Treasury note rose 8.63%.
Analysts believe Powell disappointed some traders by not revealing what steps he would take if he hoped to push down long-term yields.
Krishna Guha, vice chairman of Evercore ISI, said: “Powell maintains a ‘dovish’ stance, but it is not ‘dovish’ enough to prevent further rises in yields.”
As of early morning today, all three major U.S. stock indexes had closed down. Among them, the Nasdaq fell 2.11%, the S&P 500 fell 1.34%, and the Dow fell 1.11%.
It is worth noting that Goldman Sachs once again raised its forecast for the U.S. 10-year Treasury bond yield yesterday, and is expected to rise to 1.9% by the end of 2021.
OPEC+ continues to tighten oil supply, and Saudi Arabia voluntarily reduces production by 1 million barrels per day in April
Yesterday, the crude oil market reported another major positive news. The decision by Saudi Arabia and its OPEC+ allies to continue controlling oil supplies shocked the oil market.
OPEC stated in the statement that Saudi Arabia will continue to voluntarily reduce production by 1 million barrels per day in April. Except for Russia and Kazakhstan, which are allowed to “start small” alone, other countries will reduce production in March. Production levels continued into April. Taking into account seasonal consumption factors, Russia and Kazakhstan are allowed to increase production by 130,000 barrels per day and 20,000 barrels per day respectively.
Affected by this news, international oil prices rose sharply. As of early morning today, WTI April crude oil futures closed up $2.55, or 4.16%, at $63.83 per barrel. Brent crude oil futures for April closed up $2.67, or 4.17%, at $66.74 per barrel.
Li Yunxu, a senior energy and chemical analyst at SDIC Essence Futures, told the Futures Daily reporter that the production adjustment at the OPEC ministerial meeting in March is in line with the production reduction schedule during the year. The trend of progressive downward adjustments is a small step in the process of OPEC+ gradually increasing production. The three main reasons for this round of strength in oil prices are the less-than-expected improvement in demand, the easing of U.S. sanctions on Iran, and the collective weakening of risk appetite resulting from expectations of tighter liquidity.
“Since OPEC+’s current production increase principles basically follow a gradual process and keep a close eye on demand, and manage market expectations through high-frequency meetings and policy fine-tuning, the risk of oversupply in the crude oil market has been significantly reduced. “Market fluctuations amplified before and after a single meeting, but it is difficult to reverse the long-term trend.” Li Yunxu believes that in the post-epidemic era, global demand has gradually recovered, transportation oil demand has gradually increased, and the market’s expectations for the balance between crude oil supply and demand have shown signs of change in recent months. The characteristics of “tight balance in the far month but relatively prominent contradiction between supply and demand in the near month” mean that the fluctuation of crude oil prices mainly reflects the expected deviation in the process of converting the far month contract to the near month contract.
The Shanghai Composite Index is barely above 3,500 points, and the GEM Index has fallen nearly 5%
Recent A-shares The market continues to be weak and has fallen sharply. From February 18 to March 4, the Shanghai Composite Index, CSI 300, and CSI 500 have fallen by a cumulative 4.15%, 9.07%, and 4.50%. In terms of sectors, the procyclical sector and the low valuation sector have been restless, and recently In the past 20 trading days, steel, mining, real estate, etc. have led the gains, while group stocks such as food and beverages, pharmaceuticals and biotech, and household appliances have led the decline.
Since February, U.S. bond yields have continued to rise. On February 25, the 10-year U.S. Treasury bond yield hit a new high of 1.45% since February last year. The 10-year U.S. Treasury bond yield The interest rate spread narrowed significantly to 183 basis points, causing US stocks to fall sharply that day. After a few days of slight correction, the 10-year U.S. Treasury bond yield surged again to 1.476% on March 3, causing a sharp correction in technology stocks.
On March 4, A-shares opened low and fell sharply across the board. As of the close, the Shanghai Stock Exchange Index fell 2.05% to close at 3503 points; the Shenzhen Component Index fell 3.46% to close at 14416 points; the ChiNext Index fell 4.87% to close at 2851 points. Analysts believe that in the long run, changes in risk appetite caused by the impact of U.S. bond interest rate fluctuations on global stock indexes will still be one of the important factors influencing capital market valuations. This is also the main reason why funds favor low-valuation sectors. .
Jia Tingting, a financial analyst at Shenyin Wanguo Futures, believes that the current market style has changed significantly. There are three main reasons for the recent weakening of the A-share market:
First, as the current domestic and foreign economies are showing good recovery momentum, the market is worried about the gradual tightening of monetary policy, and the interest rate on U.S. Treasury bonds is rising.�� and the more neutral open market operations of the People’s Bank of my country exceeded market expectations.
Second, commodity prices continue to rise sharply, and the market is worried about the arrival of inflation. Since 2021, commodities have continued to be hot, and cyclical stocks have performed well. Price increases in upstream raw materials may be transmitted to the midstream and downstream, thereby raising inflation expectations. However, the current rise in commodities is mainly related to my country’s economic recovery and is a phased performance. From a macro perspective, the entry of commodities into a “super cycle” in history is often closely related to the emergence of new growth momentum in the global economy. However, the macroeconomic background of this round of rise is more of a rebound from last year’s trough, rather than an emerging trend that can support long-term growth. A new driving force for sustainable development; from a supply and demand perspective, there are uncertainties on both ends. The “temperature difference” between global economic recovery expectations and reality, supply-side response and changes in demand structure will all affect future commodity price trends.
Thirdly, there is a need for adjustment in high-valuation sectors that have experienced excessive growth in the early stage. At the same time, existing funds have also made certain adjustments and swaps in the stock market to divert part of the funds from Withdraw from the more profitable group stocks and invest in low-valuation sectors and procyclical sectors.
“At present, overseas risks have intensified, and the market is worried about the tightening of monetary policy. After continuous sharp corrections, the stock index still has the opportunity to rebound from oversold, but the upside space is limited. On the one hand, the follow-up There is uncertainty about the strength of the economic recovery. On the other hand, the withdrawal of various active policies may have an impact on the market. Overall, under the prudent monetary policy, the stock market is expected to still be dominated by a slow bull trend. Technically A The stock trend is weak and there is still uncertainty in the short term. It is recommended to wait and see and wait for clear signals of stabilization.” Jia Tingting said. </p
