In the early morning of August 20, the Federal Reserve released the minutes of its latest July meeting. The minutes showed that the FOMC expressed concerns about the prospects of the U.S. economy during the COVID-19 epidemic, predicting that the epidemic may continue to suppress economic growth and impact the financial system.
As of early morning today, the US S&P 500 index fell by 0.44%, and the European Stoxx50 index rose by 0.85%. The U.S. dollar index rose 0.77%, WTI crude oil rose 0.47%, Brent crude oil rose 0.31%, London copper rose 1.38%, gold fell 3.79%, U.S. soybeans fell 0.03%, U.S. soybean meal fell 0.07%, U.S. soybean oil rose 0.19%, and U.S. sugar rose 2.79%, US cotton rose 1.40%, CRB index rose 0.20%, BDI index fell 1.13%.
Minutes of the Federal Reserve’s July meeting: The economic recovery may not be as strong as expected, and epidemic control is the key
In the early morning of August 20, the Federal Reserve released the minutes of its latest July meeting. The minutes showed that the FOMC expressed concerns about the prospects of the U.S. economy during the COVID-19 epidemic, predicting that the epidemic may continue to suppress economic growth and impact the financial system. After the minutes were released, the three major U.S. stock indexes turned lower during the session, the U.S. dollar rose slightly, gold and silver fell more, and spot gold fell to $1,940 per ounce.
As of the close of trading early this morning, the three major U.S. stock indexes closed collectively fall. The S&P 500 Index closed down 14.55 points, or 0.43%, at 3375.23 points; the Nasdaq Index closed down 64.38 points, or 0.57%, at 11146.46 points; the Dow Jones Index closed down 83.28 points, or 0.30%, at 27694.79 points.
The minutes of the meeting show that FOMC members believe that the uncertainty of the economic outlook is still very high, and the economic path depends heavily on the development path of the epidemic. and relevant departments’ response, and this path is highly uncertain. Overall, financial conditions have improved in recent months, reflecting policies that support the economy and stable credit flows to U.S. households and businesses.
Consumer spending has rebounded from the trough in April, and the rebound has been relatively strong. Household spending has also recovered, but household spending on discretionary consumer services such as travel and leisure may remain suppressed for a period of time, which will be a factor that curbs the recovery. However, compared with consumer spending, the improvement momentum of companies in recent months has been significantly weaker.
Actions to gradually slow down the spread of the epidemic and the research and development of medical treatments and vaccines in the public health field will be key to ensuring the continued resumption of work. In addition, monetary policy and dedicated fiscal policies will also Supporting corporate activities plays an important role.
At the same time, FOMC members predict that this year’s GDP growth and unemployment rate decline will be “somewhat less strong than previously expected” and attribute this to the spread of the epidemic since mid-June. The speed increases.
As for financial stability, FOMC members predict that banks and other financial institutions are currently in good condition, but still face pressure, especially when the spread of the epidemic cannot be controlled and affects economic activities. . The accumulation of corporate debt increases the risk of corporate insolvency. Commissioners therefore agreed that these institutions, activities and markets should be closely monitored.
In terms of future monetary policy prospects, many members pointed out that a clearer path for the federal funds rate target range will be pointed out at an appropriate time in the future. It can also set forward guidance based on results and use thresholds linked to inflation, unemployment or a combination of the two to give relevant guidance. However, the Fed will keep the current interest rates unchanged until data shows real signs of economic recovery. .
Most committee members discussed the monetary policy tool of controlling the U.S. bond yield curve, that is, setting a ceiling or target for U.S. bond yields, and believed that in the current environment, it is Capping and targeting yields may have limited benefits because the Fed’s forward guidance on interest rates is already solid and long-term rates are already low. Setting yield caps and targets may bring additional costs, including excessive balance sheet expansion. Based on the above concerns, the majority of committee members determined that yield caps and targets cannot be set in the current environment, but if the environment changes significantly, it should still be an option that the Fed may consider in the future as a means of strengthening forward guidance on asset purchases. , yield caps and targets have their value and may help limit the size of asset purchases as the Fed seeks to achieve its twin goals of full employment and price stability.
Some institutional analysts pointed out that overall, the Fed meeting minutes seemed to have weakened optimism about economic growth in the second half of the year to a certain extent, which may have caused investors to avoid risks. reason. TD Securities analyst Priya Misra said it was disappointing that the minutes did not hint at an imminent relaxation of forward guidance and QE. Ian Lyngen, an analyst at Bank of Montreal, said the Fed’s caution about slowing improvements in the business sector may have weakened risk appetite, and the market is concerned that this will put pressure on hiring and ultimately weaken spending power, even if consumption remains. </The growth rate exceeded 50%, indicating a strong recovery in demand.
From the perspective of overseas consumption, Zhang Shenghan said that although the LME market has been in a contango structure recently, the market has seen successive positions being handed over, which can partly reflect the weakness of overseas consumption. There is an obvious oversupply of overseas zinc ingots, and a large amount of hidden inventory in the early stage has been made explicit, but this has not affected the continuous strength of Lun Zinc. She judged that the strength of overseas zinc prices was more affected by currency liquidity factors, and the behavior of placing positions has also become profitable driven by strong zinc prices. At present, import losses are gradually narrowing. It is expected that the surplus situation of overseas zinc ingots may stimulate the influx of imported zinc into the country in the future, supplementing the domestic zinc ingot supply to a certain extent.
Looking forward to the market outlook, in Yin Xin’s view, the fundamental improvement caused by the large-scale release of funds by global central banks and the differentiation of the global epidemic will continue. In particular, the uncertainty of the epidemic in Latin America will lead to continued tight supply of overseas zinc mines in the second half of the year, while downstream consumption will maintain prosperity under the dual-wheel drive of the “Golden September and Silver Ten” consumption seasons and new and old infrastructure. If there are no major negative macro effects in the market outlook, The zinc market will still be strong in the short to medium term.
In the short term, Jiang Lu believes that the factors affecting the traditional off-season still exist. At the same time, with the recent rapid rise in zinc prices, the market is increasingly afraid of high prices, and the downstream market is basically on demand. Procurement and trading have weakened, and Shanghai zinc still has the risk of a correction in the short term. However, in the medium term, under the domestic loose monetary policy and moderately expansionary fiscal policy, as well as the expectation of the “Golden September and Silver Ten” consumption peak season, Shanghai zinc still has a lot of room for growth.
Zhang Shenghan said that under the dual promotion of relatively favorable fundamentals and policy stimulus, zinc prices may remain in a relatively strong atmosphere in the short to medium term. In the current bullish market caused by loose global liquidity, the strength of zinc prices is also a kind of “following the trend” to a certain extent. However, in the long term, she said that the restoration of supply from overseas mines is a relatively consistent expectation in the market, but uncertainty about its progress still exists, so the large-scale restoration of forward supply is still not very obvious in suppressing zinc prices. The current zinc price is approaching the 20,000 mark, and the momentum for continued upward breakthroughs may be limited.
She finally reminded that in the future, we need to focus on the trend of large-scale resumption of production in overseas mines and changes in processing fees. Before there is a significant accumulation of inventories, zinc prices may continue to oscillate at a high level. In terms of risks, we also need to be alert to black swan events such as another outbreak. </p
