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S&P 500 hits record, Chinese deflation deepens

by SuperiorInvest

The hawkish comments from Fed members continued to make US headlines yesterday, with Susan Collins, Thomas Barkin and new Fed Governor Adriana Kugler all saying exactly the same thing: that the US .is in no rush to cut interest rates when economic data points to historic and surprising resistance to the most aggressive rate hikes in modern times.

But knowing that the Fed has finished raising its rates and the expectation that the Fed’s next move will be a rate cut is enough to keep the market in a sweet spot. A delay in the timing of the first rate cut is even This is perceived as a good thing: the US economy is doing so well that there is no need to cut rates immediately. And that is so much mieux for their corporate profits.

Here’s how the U.S. economy shrugs off the latest commercial real estate worries that cost New York Community Bancorp (NYSE:) more than half its value. And while concerns were directed at Germany’s Deutsche Pfandbriefbank, the tension is nowhere felt at the level of sovereign bonds or indices. In contrast, the United States yesterday held an unprecedented auction of its 10-year bonds, selling $42 billion worth of bonds at a lower-than-expected yield. The strong demand for the papers suggests that investors continue to overbought US 10-year notes as they sit patiently in the waiting room and watch the major US indices’ record rush to get busy. You might think that regional bank stress could lead the Federal Reserve to cut rates sooner than expected, but that’s not necessarily what we’re seeing in the market today, so I’m sticking to my cut expectations gun. of rates to explain why 10% of the U.S. Newspapers of the year saw such strong demand yesterday.

In Germany, the 10-year bund yield was unfazed by Pfandbriefbank jitters, the and the fell on Wednesday, but the declines remained too mild to hint at panic, while the new record and was trading just shy of the mark. psychological of 5,000. This is a powerful psychological milestone, and could trigger some profit-taking due to overbought market conditions and bubbly valuations. But the S&P 500’s rally is supported by anticipation of upcoming rate cuts and solid earnings. And confidence in both returns and earnings remains favorable. In this regard, Disney followed in the footsteps of its tech-happy peers yesterday and rose nearly 7% in after-hours trading after reporting better-than-expected earnings and issuing an optimistic earnings outlook.

All’s well That ends well.

in the foreign exchange market

The slowdown in US sovereign debt sell-offs is weighing on the . It came back below its 100-DMA. The fact that central bankers around the world, such as those in Europe and Australia, are also rejecting expectations of early rate cuts certainly plays a role in the dollar’s limited gains. In this context, the Reserve Bank of Australia (RBA) warned earlier this week that the bank could even consider tightening financial conditions if inflation does not fall to levels it considers acceptable. The accompanying aggressive RBA statement helped limit losses near the 65 cent level earlier this week. But the pair remains bid at the 100-day moving average, and China’s dismal inflation numbers are not helping to encourage the bulls.

Ah, China…

China announced this morning that deflation accelerated in January to -0.8% year-on-year, faster than a 0.5% deflation expected by analysts and the fastest price decline in more than 14 years. In simple terms, it means that Chinese efforts to boost growth and restore inflation are not working according to plan. The money poured into the Chinese system is not circulating in a way that stimulates the economy (blame those who lost confidence) and the radical measures the government has implemented to shore up stock valuations are hardly helping China’s battered stock markets recover. . his feet. Today, sentiment on the CPI 300 index is mixed. Yesterday I wrote that a higher-than-expected deflation figure will undoubtedly encourage Chinese authorities to announce more stimulus measures. But measures alone will not help buoy Chinese markets if investors do not play along.

Another concern about the Chinese recovery is that as the Chinese dream has been dashed by a $7 trillion sell-off in the stock markets, many could be tempted to take the loss and walk away at the slightest recovery. In short, the path to a sustainable recovery seems distant.

Zooming in, Alibaba (NYSE 🙂 missed a chance to break out of its downtrend channel that has been building since last August, as its stock fell 6% after its sales missed expectations in the latest Q4 report The latter offset a $25 billion buyback program the company just announced. Alibaba’s price chart for the past five years is the best summary of how things went for Chinese stocks under the Xi-led government. was busy hitting its tech gems with baseball bats, imposing absurd COVID-zero rules and making both Chinese consumers and foreign investors behind its back. Here we are today, waiting for more measures to cheer us up.

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