Market review

The US dollar index was affected by both the 'rate cut trade' and the 'Trump trade' this week. At the beginning of the week, Trump's assassination attempt increased his chances of winning, and the market expected his policy to be bullish for the US dollar. However, after retail sales data was higher than expected, the US dollar index rose to 104.51, but it gave up all gains due to market concerns about the possibility of a Fed rate cut, and then fell below 104 and fell to a four-month low. On Thursday, the US dollar index rebounded and recorded its largest daily gain since June 13th, and it closed up for the first time in three weeks this week.

Spot gold fell this week after repeatedly hitting historical highs and fell for the first time in four weeks as a whole. At the beginning of the week, spot gold strengthened due to Powell's statement that progress has been made on the road to anti-inflation, and market rate cut expectations were boosted. Due to traders betting on Trump's victory, gold rose above the 2480 mark, hitting another historical high, but then began to fall due to traders' profit-taking. It fell for three consecutive trading days from Wednesday to Friday and finally closed at the 2400 level.

Non-US currencies continue to be affected by the trend of the US dollar, and the pound, euro, Australian dollar, and Canadian dollar have all performed poorly. Under the suspected intervention of the Japanese authorities, the US dollar against the yen plummeted, and it fell for the second consecutive week this week.

International oil prices fell as a whole this week, falling for the second consecutive week. Reasons include concerns about insufficient demand in the market and Hamas' statement that it has not given up negotiations. Both oils fell more than 3% this week.

In terms of US stocks, the S&P 500 index hit a new high again on Tuesday, but then a large-scale rotation boosted small-cap and industrial stocks, suppressed technology stocks, and 'Microsoft's blue screen' incident on Friday added pressure to technology stocks. The Nasdaq stopped rising for six consecutive weeks. The S&P 500 and Nasdaq fell by about 2% and 3.7% respectively this week, both recording the largest single-week decline in three months, while the Dow rose 0.7% this week.

Bitcoin rose sharply this week, and its highest point reached $67,000 per coin.

Major events of the week

1. US Federal Reserve officials release messages before the 'silent period'

US Federal Reserve officials made frequent speeches this week. Although most officials did not reveal the time of the first rate cut, economists and investors believed that their speeches suggested that action would be taken in September.

Federal Reserve Chairman Powell said on Monday that recent economic data has increased the Fed's confidence in cooling inflation, and if the labor market unexpectedly weakens, it may also prompt a policy response. He pointed out that it would be too late if the Fed waits until inflation reaches 2% before cutting interest rates.

Nick, a journalist from The Wall Street Journal who is called the 'Fed Tube', said that Powell's speech did not change the expectation that the Fed would 'wait and see' in August.

In terms of other officials, William, the permanent voting member and the president of the New York Fed, hinted that if inflation continued to slow down in the near future, there might be reasons to cut interest rates in the coming months, but he would not cut interest rates at the Fed meeting in two weeks. The key is that Fed Governor Bullard, who had held a hawkish view before, has had an obvious shift in position. He now believes that the timing of the rate cut is getting closer and closer based on potential scenario analysis, but the exact time of the rate cut is not very important.

Daly, the president of the San Francisco Fed, said that confidence in cooling inflation has strengthened, but the goal has not been achieved, and more information needs to be evaluated before making real decisions. Fed Governor Quarles reiterated that if inflation continues to slow down but the job market remains resilient, cutting interest rates later this year would be appropriate. President of the Chicago Fed, Charles Evans, even said that if the Fed does not cut interest rates soon, the labor market may deteriorate sharply.

Data shows that initial jobless claims in the United States last week recorded the largest increase since early May, and continuing claims have reached their highest level in more than two years. This is the latest sign of a cooling labor market.

The latest Economic Beige Book released by the Fed showed that from early April to mid-May, economic activity in the United States continued to expand, but sustained inflation, high interest rates, and political uncertainty have made companies “more pessimistic.” Before inflation slows further and the Fed can cut interest rates, the economy is unlikely to accelerate. The survey shows that the 2024 U.S. presidential election also has an impact on the economy.

Chief economist of Goldman Sachs Jan Hatzius said that they believe the Fed has 'sufficient reasons' to cut interest rates at the July meeting, but it has not changed their prediction that the Fed will start cutting interest rates in September. However, according to its latest analysis, global rating agency Moody's expects the Fed to start cutting interest rates by 25 basis points at the end of this month at the earliest.

Data shows that US retail sales in June recorded 0% monthly rate, higher than the expected -0.3%, and retail sales reached the largest increase in three months, indicating that the main driving force of the US economy is still strong. The data slightly lowered the market's expectations for the Fed's three rate cuts this year.

2. Latest Developments in the US Election: Biden may withdraw as early as this weekend

At the Republican National Convention held this week, Trump was officially nominated as the presidential candidate of the party, and he announced that he had chosen the new Republican star, Senator JD Vance from Ohio, as his running mate.

In an interview, Trump stated that even if elected, he would not replace Federal Reserve Chairman Powell in advance, and he does not want to cut interest rates before November. He also pointed out that Jamie Dimon, CEO of JPMorgan Chase, is one of the candidates for the Treasury Secretary, hoping to reduce the corporate tax rate to 15%, and no longer planning to ban TikTok.

On the Democratic side, Biden has just announced that he will reassess whether he will continue to run for president if his physical condition deteriorates. He then announced that he tested positive for COVID-19 and canceled his speech in Las Vegas. It is reported that the Democratic Party will not officially nominate Biden as the presidential candidate until August.

According to US media reports, Democratic leaders such as Schumer, Pelosi, and Obama hope that Biden will assess whether to continue participating in the election. Some senior officials believe that Biden may withdraw from the race as early as this weekend. US media also reported that Biden instructed the evaluation of Harris’ popularity, and that he had accepted the possibility of losing and withdrawing, but has not made a decision yet.

In response to reports that he donated $45 million per month to Trump, Musk stated that he did not promise anyone any donations. He did create a political action committee (PAC) that focuses on supporting US presidential candidates, but did not promise any donations to anyone. So far, monthly funds have been "far below" $45 million.

3. Global banks and airlines in chaos due to Microsoft problem.

On Friday, Microsoft experienced a serious service interruption, affecting enterprises and users around the world, involving LME exchange, multiple banks, airlines, TV stations, emergency centers and other fields. "Microsoft Blue Screen" became a hot topic, and under the relevant topic, many netizens displayed pictures showing computer blue screen, many of which showed the error "csagent.sys". The event also triggered a safe-haven reaction in the financial market. European stock markets fell further, and exchanges were affected which resulted in market liquidity damage because derivatives professionals, index and interest rate market makers were all affected. Foreign media reported that this global IT failure is similar to an incident in 2010, which exposed the crisis of network vulnerability. Microsoft and CrowdStrike's stock prices fell sharply in pre-market trading.

The event also triggered a safe-haven reaction in the financial market. European stock markets fell further, and exchanges were affected which resulted in market liquidity damage because derivatives professionals, index and interest rate market makers were all affected. Foreign media reported that this global IT failure is similar to an incident in 2010, which exposed the crisis of network vulnerability. Microsoft and CrowdStrike's stock prices fell sharply in pre-market trading.

4. The European Central Bank is holding steady, and everything is possible in September.

The European Central Bank is keeping interest rates unchanged as scheduled and has not given any guidance on the next step, and also said that domestic price pressures are still high and inflation will remain above the target next year.

The European Central Bank has issued a balanced message, stating that corporate profits are digesting some price pressure, but risks still exist. Further evidence is needed before policymakers trigger the second interest rate cut. The upcoming information mainly supports the committee's previous assessment of the medium-term inflation outlook. The committee also emphasized that it will continue to follow a data-oriented and sequential way of meeting decisions to determine appropriate restrictive interest rate levels and duration.

According to Bloomberg's survey, although Lagarde is the president of the European Central Bank, economists are most concerned about the opinions of German officials Schnabel and ECB Chief Economist Lane.

5. Japan suspected of intervening in the foreign exchange market for two consecutive days last week.

According to the comparison of Japan's central bank current account data and currency brokers' estimates, Japan may have intervened in the currency market for two consecutive days last week to support the yen.

After the US PPI data was released last Friday, the yen appreciated significantly. The scale of intervention may be about $ 13.5 billion. The previous night, after weaker than expected US CPI data, the government may have spent $ 22 billion to support the yen. This means that Japan spent up to $ 35.5 billion last week to support the yen. In addition, Friday's data showed that core inflation in Japan rose for the second consecutive month in June, continuing a trend that has been higher than the Bank of Japan's 2% target for more than two years and supporting market expectations of a recent rate hike. Bank of Japan Governor Haruhiko Kuroda hinted that if wage and service price increases enhance the prospects of achieving the 2% inflation target sustainably, the central bank will further raise interest rates.

6. Russia plans to further reduce production to balance OPEC+ quotas.

According to sources, Russia plans to further reduce crude oil production to make up for the excess production beyond the OPEC+ quota during this year and next year's warm season. Due to technical reasons, Moscow's additional production reduction measures are most likely to be implemented in the summer and early autumn. Since cooperating with OPEC, Russia has been stating that it cannot significantly reduce production in late autumn and winter due to the geological and climatic conditions of its oil fields. Insiders said that additional constraint measures that are expected to be taken will be implemented in the West Siberian oil fields, where production can be regulated. Representatives of OPEC+ believe that the organization's meeting next month will be a "routine matter" and will not adjust the production increase plan that will start from the fourth quarter. The alliance has reduced production for nearly two years to support oil prices and avoid the risk of oversupply caused by the surge in US production.

7. Shanghai and Shenzhen Stock Exchanges: Research and demonstrate differentiated charging programs for high-frequency trading.

Since cooperating with OPEC, Russia has always stated that it cannot significantly reduce production in late autumn and winter due to the geological and climatic conditions of its oil fields. It is expected that additional restrictions will be implemented in the West Siberian oil field, where production can be regulated, according to insider sources.

OPEC+ representatives expect that next month's meeting of the organization will be "routine" and will not make any adjustments to the production increase plan starting from the fourth quarter. The alliance has reduced production for nearly two years to support oil prices and avoid the supply glut risk posed by the surge in US output.

Russian sources say that the country may impose production cuts to balance out the excess production beyond the limits set in the OPEC+ agreement.

Recently, it was reported that the exchange is soliciting opinions from some market institutions on differentiated fees for high-frequency trading. Some foreign institutions are worried about inconsistent fee standards.

The relevant persons in charge of the Shanghai Stock Exchange and the Shenzhen Stock Exchange said that at present, we are conducting research and demonstration on differentiated fees for high-frequency trading and will adhere to the principle of consistency between domestic and foreign capital, treat all market participants fairly, improve relevant fee mechanisms on the basis of full evaluation and calculation, enhance the pertinence of high-frequency quantitative trading supervision, and not worry about unfair treatment. For the differential fee arrangements involving high-frequency trading institutions, we will also fully listen to the opinions and suggestions of market institutions and smoothly and orderly launch them.

After the first batch of Saudi ETFs went public and surged, they drew regulatory attention.

Two ETFs focusing on Saudi Arabian stocks began trading on the Shanghai and Shenzhen Stock Exchanges this week. They both rose by the daily limit on the first day and were heavily monitored after continuous limit ups and significant premiums.

On July 18th, CITIC Securities and other brokerage firms issued reminders to investors that the premium rates of Saudi ETFs (520830) and Saudi ETFs (159329) were high recently, and there was a serious market speculation risk. The Shanghai Stock Exchange and the Shenzhen Stock Exchange will strictly identify the abnormal trading behavior of the above securities, and take self-regulatory measures such as listing as key monitoring accounts, suspending account trading, restricting account trading, and so on, depending on the situation.

Zong Fuli resigned from her position at Wahaha Group.

According to reports, Zong Fuli, the Vice Chairman and General Manager of Wahaha Group, chose to resign due to some shareholders questioning the rationality of her management. There is also a report circulating online alleging that a former employee of Wahaha Group reported a complaint letter accusing Zong Fuli, the president of Hongsheng Group, of embezzling a huge amount of state-owned assets of Wahaha Group. The State-owned Assets Supervision and Administration Commission of Hangzhou Shangcheng District responded that it is understanding and verifying the situation.