-We don't see investors reacting in their usual way.
An informative day:
1. The European Central Bank raised the key interest rate by 50 basis points (twice as much as hinted a few days ago) by a rate increase exceeding market expectations, ending eight years of negative interest rates, which was its first rate increase in 11 years.
2. Draghi resigned as Prime Minister of Italy, and Italy will hold an early general election on September 25th. The situation in Italy has sparked alarm among traders, and the news is likely to make headlines in the coming weeks.
3. The Philadelphia Fed's manufacturing expectation index fell to its lowest level since 1979 (the economic slowdown exceeded expectations). Other data show:
-The leading economic indicators of the World Large Enterprise Research Association fell by 0.8% in June, the biggest decline in the worst epidemic period in April 2020.
-The number of Americans applying for unemployment benefits rose to the highest level in eight months, which further aggravated people's worries about economic recession.
4. US President Biden Novel Coronavirus tested positive with mild symptoms, which caused the US stock market to fall slightly.
Almost all bad news, but the performance of financial markets is surprising:
-The U.S. stock market has gone up.Many people think that after the bad news came out, US stocks rose instead, which may be a sign that the bad news is exhausted. But there are two points to note:
First, the rise in US stocks was mainly affected by strong profit reports from big companies (earnings may be better than investors feared), rather than "treating bad news as good news".
The Nasdaq index, which is dominated by technology stocks, led the gains, and the Nasdaq index rose 1.36% to 12,059.61 points.
The Dow Jones index rose 0.51% to 32,036.77 points; The S&P 500 index rose 0.97% to 3998.50 points. Tesla reported better-than-expected quarterly results, and its share price soared 9.8%.
In addition, the market has advanced the end time of the Fed's interest rate hike and the time of interest rate cut-it is expected that the federal funds rate will reach a peak of 3.47% in February 2023, then start to decline, and a 25 basis point interest rate cut will be made a few months later.
For the US stock market, it is more likely to be a "staged rebound" than a "bottoming rebound" at present, because the path of raising interest rates by the Federal Reserve has not yet been finalized, and the stock market may bottom out only after the Federal Reserve gives an exact signal of how many basis points to raise interest rates in September.
-The US dollar index fell,
It triggered a chain reaction in other markets, which is the biggest guide for investors. Whether the US dollar "weakens" is what we need to focus on. According to our speculation, the US dollar index is likely to be the first major market to change from July to September.
The "Fear and Greed Index" compiled by Wall Street Intelligence Circle (which successfully warned the top of the current trend of the US dollar) shows that the risk appetite of the US dollar index has entered a neutral level, and once it falls below this level, there will be a new round of decline.
-The yield of 10-year US bonds fell below 3.00%
(Weaker-than-expected economic data reversed the decline in bond markets caused by the European Central Bank's 50 basis point interest rate increase),As mentioned in previous articles, "3.00%" is a very important level-standing above 3% means that the market is more worried about inflation, and standing below 3% means that the market is more worried about recession.
Of course, the yield has been fluctuating around the "3.00%" level recently, and no final trend choice has been made. From the current situation, it is likely to choose below 3.00%, because bond investors have already given up tactically (there will be an outflow of 206 billion US dollars from bond funds in 2022).
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