There appear to be some positive signs regarding liquidity!
In the morning session on March 6, the non-ferrous metals sector experienced a collective rise, with gold up more than 1%, silver up over 2.3%, and copper, platinum, zinc, nickel, and others showing strength. By midday closing, the three major A-share indices collectively gained, with the Shanghai Composite Index rising by 0.25%, the Shenzhen Component Index increasing by 0.8%, and the ChiNext Index climbing by 0.85%.
Meanwhile, the Hong Kong market also moved against the broader Asia-Pacific market trend. As of this report, the Hang Seng Tech Index surged over 3.6%, while the Hang Seng Index rose more than 1.8%. U.S. stock futures and European stock futures collectively rebounded in the early trading session during the Asia-Pacific hours. Cryptocurrencies have also seen significant gains recently. All these point to one variable: liquidity may be improving.
Ask Futubull AI:From signals coming out of the U.S. market, there are indeed signs of improved liquidity. Last night, the U.S. leveraged loan index rose again, marking the second consecutive day of rebound; overnight reverse repo volumes expanded significantly by nearly $2 billion compared to the previous period; and the Fed's balance sheet expansion also increased notably.
Notably, Middle East-related assets such as international oil prices and natural gas retreated in the morning session today, possibly indicating an improvement in market expectations regarding geopolitical tensions.
Signs of improvement in dollar liquidity have emerged.
In fact, prior to the outbreak of hostilities in the Middle East, global markets had already fluctuated due to dollar liquidity issues. The tight military situation might have forced an improvement in dollar liquidity. Yesterday, the Federal Reserve’s total assets expanded to $6.6289 trillion, representing a $15 billion increase from the previous day. Meanwhile, overnight reverse repo operations expanded by nearly $2 billion, and the U.S. leveraged loan index rebounded for two consecutive days.
The resulting market movements showed that non-ferrous metals began to rebound today, with gold, silver, and copper all reacting positively. The U.S. Dollar Index retreated during the Asia-Pacific trading session. The Hong Kong market also saw a significant improvement, with the Hang Seng Tech Index bouncing back by 3.6%.
Previously, institutions such as JPMorgan and Citi projected that liquidity conditions would become more supportive by 2026, accompanied by a sustained easing bias and potentially some asset purchases. However, since the beginning of this year, liquidity issues have arisen. Some analyses suggest that the repurchase market and short-term funding rates experienced seasonal fluctuations at year-end/early-year (e.g., record usage of the Standing Repo Facility), but conditions stabilized by March. The Fed’s Vice Chair for Supervision recently emphasized the need to review the effectiveness of liquidity rules, highlighting that the resilience of the banking system under stress still requires observation.
Globally, although the share of dollar reserves has been slowly declining (to about 57%), the dollar remains the primary source of liquidity during crises. Recently, the ongoing deterioration of the Middle East situation has strengthened the dollar's safe-haven and liquidity attributes, providing additional support to the dollar index during volatile periods. Therefore, the Middle East could remain the most significant variable affecting global dollar liquidity in the near term.
Variables influencing international oil prices
The Middle East primarily influences global markets through oil prices. Following a significant surge last night, international oil prices experienced a substantial correction today. This morning, WTI crude oil一度下跌一度 fell by nearly 3%. Meanwhile, there were also reports from the White House regarding measures to address rising oil prices.
US Interior Secretary Doug Burgum stated that the White House is weighing a range of options to address the spike in oil and gasoline prices during the Iran conflict. All options are under consideration, including actions that could have an immediate impact as well as longer-term and more complex measures.
President Trump held an emergency meeting with Burgum and other senior advisors this week to discuss a series of options. Subsequently, he announced plans to provide insurance guarantees and naval escorts to ensure safe passage for tankers and other vessels through the Strait of Hormuz. Other possible measures include tapping the national emergency oil reserve and potentially coordinating actions with other countries to maximize effectiveness.
Washington analysts and other market participants noted that the White House could also consider other options, including exemptions from fuel blending requirements, or even allowing the US Treasury to trade oil futures. Burgum mentioned that details of the plan for the US International Development Finance Corporation to insure tankers are still being formulated. He believes that the US can assume some risk to ensure sufficient supplies for its allies around the world.
However, Samantha Dart, Co-Head of Global Commodities Research at Goldman Sachs, expressed doubts about the practical feasibility of providing naval escorts for ships due to the large number of tankers. The market also has deep concerns about the effectiveness of escort fleets in defending against drone attacks.
What is the outlook for the market?
Guosen Securities noted that the valuation of the Hang Seng Tech Index is at a historical low, and the emergence of an earnings bottom is a key investment consideration. Geopolitical tensions, such as conflicts involving Iran, add uncertainty, but there is long-term optimism about the potential of AI and energy sectors. A balanced allocation is needed to manage volatility.
GF Securities stated that if market sentiment can improve effectively by mid-to-late March, attention should be paid to the Hang Seng Tech Index. First, large-scale AI models require scenario-based monetization, and progress in C-end applications may catalyze the fundamentals of Hengke. Second, foreign capital has pricing power over internet stocks, and if overseas liquidity reverses subsequently, related stocks may exhibit greater elasticity.
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