I. Performance of Global Equity Indices (in US dollars)
Source:Bloomberg,2024/05/13-2024/05/19
II. Key Market Themes
i. U.S. CPI Growth Rate Declines for the First Time This Year, Fed's Rate Cut Path Becomes Clearer!
In April, the U.S. core PPI increased by 0.5% month-on-month, significantly exceeding market expectations. However, this was mainly due to the government sharply revising down last month's data, with the March increase being revised from the previous 0.2% to -0.1%, directly leading to the "explosive" April PPI data. The market reacted quickly to this, and there was no significant decline.
The following day, the U.S. April CPI increased by 3.4% year-on-year, and the core CPI increased by 3.6% year-on-year, both in line with market expectations. This marks the first decline in the CPI growth rate this year and alleviates the tension of three consecutive months of exceeding expectations. Notably, core goods continued to deflate, essentially returning to pre-pandemic levels.
From a detailed perspective, housing inflation remains persistently high, rising 5.5% year-on-year, contributing 60% of the overall CPI increase. However, Powell is relatively confident about this, believing that there is significant lag in housing rentals and that housing inflation will decline over time. Additionally, according to third-party rental platform Zillow, February's rent only saw a 3.4% year-on-year increase, indicating an already apparent downward trend in growth rate.
We believe that a single inflation data point meeting expectations is not sufficient to cause a major shift in the Fed's stance, but it is enough to ease market concerns about "secondary inflation." Currently, developments are progressing along the path Powell previously envisioned, and the future rate cut path is becoming clearer. It is highly likely that there will be "two cuts this year, with the first in September."
Source:Bloomberg
Source:Bloomberg
ii. China's Real Estate Sector Takes Big Steps, Boosting Confidence in Greater China Assets!
On May 17, a nationwide video conference was held in Beijing to effectively ensure the delivery of housing projects, introducing a "combo" of policies in areas such as credit policy, supporting government acquisitions, and revitalizing stock land. These can be interpreted from two aspects: "ensuring supply" and "promoting demand":
On one hand, the meeting emphasized the role of the real estate financing coordination mechanism, specifically stressing that projects meeting the whitelist conditions should be "included wherever possible" and "loans should be granted as much as possible";
On the other hand, to "digest inventory", the central bank plans to set up 300 billion yuan of refinancing for affordable housing, which, together with 21 banks, will drive a total of 500 billion yuan to support local state-owned enterprises in acquiring existing commercial housing; For the residential sector, a "triple measure" approach has been taken: reducing the down payment ratio for individual housing, lowering the interest rate on housing provident fund loans, and removing the national floor on housing commercial loan interest rates.
We believe this "combo" policy is rare in that it simultaneously addresses both "quantity" and "price," highlighting a comprehensive policy shift and demonstrating the country's determination to stabilize the real estate sector. While the effectiveness of this single policy will take time to be tested, it greatly increases investor confidence in the Greater China market.
Source: Wind, Shanghai Pudong Development Bank International
iii. GPT-4o and Gemini 1.5 Released Successively, AI Moves Further Towards Application End!
This week, OpenAI released an iterative version of ChatGPT-4, GPT-4o, which can use any combination of text, audio, and images as input and generate any combination of text, audio, and images as output in real-time. This makes the interaction between AI and users simpler, smoother, and more natural.
The next day, Google also released its new generation large model, Gemini 1.5 Pro, with a context length of up to 2000k tokens, far superior to previous versions like GPT-4 and Claude3. At the same time, Google $谷歌(GOOG)$ also announced Project Astra, whose visual recognition and voice interaction capabilities are on par with GPT-4o. Interestingly, Microsoft's $微软(MSFT)$ developer conference is set to take place in a few days, where its latest AI products and features will also be unveiled.
With major cloud providers gradually increasing their efforts, AI is making significant strides towards the application end! Taking GPT-4o as an example, it integrates a truly native "multimodal" model for the first time, which significantly reduces the time consumed by a single model and effectively avoids information loss during modal conversion. As a result, the market's focus on cloud providers will gradually shift towards their application deployment capabilities and potential profit contributions.
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