A week in review: Global financial markets are rocked by concerns about inflation and interest rates

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Hong Kong stock market

Hong Kong stocks rose sharply last week and fell, with the index reaching a high of 18,300 points. Although it saw a sharp decline on Friday, it still recorded a red reading last week. Ahead of the release of the Federal Reserve’s September CPI and other data released on Thursday, the Hong Kong stock market continued to recover due to the decline in long-term US debt yields, the dollar fell back against the yuan, Chinese stocks continued to rise, and the influence of dovish statements on the Federal Reserve Meeting Minutes. As CPI beat market expectations on Thursday, market expectations that the Federal Reserve will raise interest rates again this year also weighed on the stock market. Looking ahead to next week, the trend of the short-term recovery has changed, although the index did not fall below the short-term moving average after the big swings. The probability that the index will continue to fluctuate sharply is expected to increase and the volatility will be concentrated at the level of 17600-18000 points. At the market level, the problems of the sector are mainly tested, but in the shock pattern the situation of expected differentiation is in the foreground.

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US stock market

The strength of newly released September US CPI data has weakened the positive sentiment generated by several Fed officials recently saying they may no longer need to raise interest rates, and has also added uncertainty over interest rate policy increased for the remainder of 2023. Under this stimulus, market sentiment fluctuated and the two-year US Treasury yield again exceeded the 5% threshold; U.S. 10-year Treasury yields rose nearly 15 basis points. US stocks also entered the diving market. The three major indexes fluctuated wildly, falling more than 1% at one point. The strong impact of the US CPI data, overshadowed by the conclusion that global inflation just released by the IMF will remain high through 2025, suggests that the US stock market will continue to be dominated by negative expectations of strong inflation and interest rates will be hiking next week.

Fixed-interest securities market

Early last week, risk aversion caused by the Palestinian-Israeli conflict led to a rebound in the Treasury market, but trading in the bond market quickly weakened when U.S. September inflation data released on Thursday beat expectations. Although Fed officials have recently issued dovish signals, data shows that slowing inflation still faces major challenges and developments in economic data could prolong the tight monetary environment. Following the release of the data, both the stock market and the bond market were under pressure. At the same time, the auction of 30-year government bonds went cold, causing the government bond yield curve to quickly steepen. In terms of maturity structure, the bull market of the Treasury yield curve steepened last week, the long-term Treasury yield fell significantly, and the inversion of 10-year and 2-year Treasury bonds deepened.

Author: Eddid Securities and Futures Research Department

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