Market Review
Key News
China Market
1. China's October CPI and PPI Both Decline Year-on-Year
Affected by favorable weather leading to abundant agricultural product supply and a post-holiday decline in consumer demand, the October CPI turned from flat to a decline. Additionally, impacted by fluctuations in international crude oil and non-ferrous metal prices and base effects, the PPI's year-on-year decline slightly widened. Specifically, China's October CPI decreased by 0.2% year-on-year, with the previous value being 0%. The core CPI, excluding food and energy prices, increased by 0.6% year-on-year, with a slight decrease in growth rate. Meanwhile, October PPI decreased by 2.6% year-on-year, with the previous value being a 2.5% decrease, further expanding the decline; China's October PPI remained flat month-on-month, with the previous value being 0.4%.
2. The People's Bank of China Says It Will Adjust and Optimize Real Estate Policies When Appropriate
The People's Bank of China stated that it aims to adapt to the significant changes in the supply and demand relationship in the real estate market, making timely adjustments and optimizations to real estate policies to promote a stable and healthy development of the housing market. It emphasizes maintaining a balance between internal and external equilibriums, keeping the RMB exchange rate fundamentally stable at a reasonable and balanced level, firmly guarding against the risk of excessive exchange rate fluctuations. It will advance high-level financial openness in both directions, improving the economic and financial management capabilities and risk control abilities under open conditions.
3. The People's Bank of China to Enhance Offshore RMB Risk Management Tools
The People's Bank of China pointed out the facilitation of using the RMB more in foreign trade and investment by operational entities, the orderly promotion of comprehensive systemic opening of financial markets, and the steady progression of bilateral local currency swaps and settlement cooperation between central banks. RMB clearing banks have been authorized in 29 countries and regions, covering major international financial centers globally. As of the end of September 2023, the RMB cross-border payment system (CIPS) had 102 direct participants and 1377 indirect participants, serving 4344 corporate banking institutions across 182 countries and regions.
Overseas Markets
1. Powell Says He'll Hesitate Not to Raise Interest Rates if Necessary
Federal Reserve Chairman Powell said he is not confident monetary policy is tight enough to lower inflation to 2%, reiterating caution but stated the Fed would not hesitate to raise rates if appropriate. Following Powell's remarks, U.S. stocks extended losses, with the Nasdaq falling by 1%. "New Fed Wire" said Powell is cautious about further rate hikes or announcing an end to hikes. His speech hardly provided more reasons for another rate hike, but he added, "we are not confident" that policy has been tightened enough to reduce inflation.
2. Dismal U.S. 30-Year Treasury Auction
The U.S. Treasury auctioned $24 billion in 30-year bonds, and the demand was so dismal that the financial blog Zerohedge described it as "an absolute disaster." Specifically, the high yield rate of this 30-year bond auction was 4.769%, although it was lower than the yield rate of 4.837% at the auction on October 12, it's not far from the high in April 2010. The expected yield rate of 30-year bonds at the time of auction was 4.716%, resulting in a "tail" of 5.3 basis points, the largest tail margin since records began in 2016.
3. Fed's RRP Use Falls Below $1 Trillion
Data released by the Federal Reserve shows that a total of $993 billion was deposited by 94 counterparties in the Fed's overnight reverse repurchase agreement (RRP) tool, falling below the $1 trillion mark for the first time since August 10, 2021. After reaching a record peak of $2.554 trillion on December 30, 2022, funds have been steadily flowing out of the mechanism in recent months. Many market participants and some within the Fed have come to view the reverse repo mechanism as a representative of excess liquidity in the financial system.
4. Oil Producers Negotiate with Iraqi Government to Restart Exports
International oil producers in the Iraqi Kurdistan region have proposed directly selling oil produced from their fields to the Iraqi federal government in an effort to resume exports that have been stalled for over seven months. Since a payment dispute caused Turkey to shut down the pipeline transporting oil to the Mediterranean coast, companies operating in the semi-autonomous Kurdistan region have virtually stopped production, cutting off about 500,000 barrels per day of supply from northern Iraq to the global market. Representatives of these companies met with Iraqi officials in Dubai, proposing to sell their output directly to the state-owned oil marketing company SOMO.
Today's Focus
Today, investors should pay attention to the UK's industrial output, third-quarter GDP, trade balance, and the US Michigan consumer sentiment index among other economic data. Additionally, investors should closely monitor risk events such as the situation in Israel and Palestine, remarks from the Dallas Fed President Logan, and speeches by the President of the European Central Bank, Lagarde.
