Hot news of the week

• G7 Group: agree to set the world's lowest corporate tax rate at 15%

On June 5th the Group of Seven (G7) reached a historic global tax agreement in London, setting a minimum tax rate for multinationals at at least 15 per cent. It is reported that the purpose of the minimum corporate tax rate is to prevent multinationals such as Facebook, Amazon.Com Inc and Microsoft Corp from transferring profits to reduce taxes, so that these corporate giants can pay more taxes in the countries where they operate. And adjust the system to deal with trade in intangibles such as data and information.

• The usage of overnight reverse repo by the Federal Reserve hit a record high of more than $486 billion.

Demand for a tool used by the Fed to control short-term interest rates soared to a record high as huge amounts of cash were looking for a place to go. The Fed's overnight reverse repo tool-the way counterparties such as money market funds deposit cash with the central bank-absorbed a total of $486.097 billion from 46 participants on Monday. That surpassed the previous record high of $485.3 billion on May 27th and up from $483.3 billion on Friday, according to data released by the New York Fed.

• OECD: the total economic output of the G20 members returned to the pre-epidemic level in the first quarter, and China's year-on-year growth was the strongest.

According to data released by the Organization for Economic Cooperation and Development, the total economic output of the Group of 20 (G20) members grew by 0.8% month-on-month in the first quarter of this year, 3.4% year-on-year, and has returned to the level before the COVID-19 epidemic. However, there are significant differences in economic status and growth trends among members. The OECD also pointed out that among the G20 members, China achieved the strongest year-on-year growth in the first quarter of this year, reaching 18.3 per cent, while the UK suffered the worst decline, down 6.1 per cent from the same period last year.

• The survey shows that nearly 60% of European companies plan to expand their business in China: China is a safe haven in the epidemic.

Nearly 60 per cent of European companies plan to expand their operations in China this year, up nearly 10 percentage points from 51 per cent last year, according to an annual survey released by the European Union Chamber of Commerce in China on Tuesday. After recovering rapidly from last year's epidemic, China has become a more important source of economic growth and profits in Europe, with European companies investing more in China and shifting supply chains domestically. About half of the companies surveyed said their profit margins in China were higher than the global average, up from 38 per cent in last year's survey.

• World Bank: global economic growth is expected to reach 5.6% in 2021

The World Bank on the 8th released the latest "Global Economic Outlook" report, raising the global economic growth forecast for 2021 to 5.6% from the previous forecast of 4%. The report also mentioned the risks associated with rising inflationary pressures. Malpas, president of the World Bank, called on the United States and other developed countries to provide surplus vaccines to developing countries as soon as possible.

• Investment demand for gold rose sharply in May, and global gold ETF positions rebounded strongly.

The World Gold Council revealed on the 9th that investment demand for gold rose sharply in May, and positions in global gold ETF (exchange traded funds) rebounded strongly. In May, total global gold ETF positions increased by 61.3t, reversing the three-month net outflow trend. According to the analysis of the World Gold Council, the main reason is that investment demand increases with the strengthening of gold prices, while market inflation fears return, a weaker dollar and falling real yields also exist at the same time. According to the report, large funds in the US, UK and Germany have once again become the dominant forces in gold ETF flows, and they dominate the net inflow trend. North American fund holdings increased by 34.5 tons, while European funds inflowed 31.2 tons. The size of funds in other regions fell by 1.9%.

• Us CPI recorded the largest year-on-year increase in nearly 13 years in May

On the evening of the 10th, Beijing time, the United States released CPI data for May: the US CPI in May rose 5% year on year, estimated at 4.7%, and the previous value was 4.2%, the largest annual increase since August 2008; the core consumer price index rose 0.7% month-on-month and 3.8% from the same period last year, the largest annual increase since 1992. This far exceeded economists' expectations and further heightened concerns about US inflation.

Analysts believe that the current rise in inflationary pressure in the United States is driven by a series of factors, including the fiscal and monetary stimulus policies introduced by the Biden administration, and prices gradually rebounded with the promotion of COVID-19 vaccination and the resumption of the service industry. At the same time, supply chain bottlenecks continue to push up production costs. Most Fed officials believe inflation will fall later this year as the imbalance between supply and demand in various sectors eases.

• China's CPI rose 1.3% in May from a year earlier, and prices in the oil and gas mining industry rose 1.7%.

China's consumer price (CPI) rose 1.3 per cent in May from a year earlier, with an expected increase of 1.6 per cent and a previous increase of 0.9 per cent. China's industrial producer prices (PPI) rose 9.0 per cent in May from a year earlier, with an expected increase of 8.5 per cent and a previous increase of 6.8 per cent. Dong Lijuan, senior statistician of the City Department of the National Bureau of Statistics: the fluctuation of international crude oil prices has led to a rise in the prices of domestic oil-related industries, of which the prices of the oil and natural gas mining industry rose 1.7 percent, an increase of 1.3 percentage points. The prices of oil, coal and other fuel processing industries increased by 4.4%.

Review of the market this week

The three major indexes of US stocks have performed differently this week.$Dow (.DJI.US) $Down 0.80%$S & P 500 (.SPX.US) $Up 0.41%$Nasdaq Composite Index (.IXIC.US) $Up 1.85%

Hang Seng Technology Index (800700.HK) $Down 1.29%$gem refers to (399006.SZ) $Up 1.72%.

Viewpoint of institutional allocation

Castrol: "Central Mother" steps in to calm the expectation of RMB appreciation, which has a limited impact on the stock market.

Recently, the RMB exchange rate rose above 6.4, the highest since April 2018. The people's Bank of China has decided to raise the required reserve ratio for foreign exchange deposits from the current 5% to 7% with effect from June 15. Castrol believes that this has little impact on the stock market.

From the perspective of the balance of foreign currency loans, the monthly increase in foreign currency loans fluctuates greatly, with an average amount of about 30 billion yuan. Compared with the overall size of the market, the impact of this money on the stock market is limited. Second, the central government's move may slow the pace of RMB appreciation in the short term, but it is difficult to change the general trend. Whether it appreciates or not fundamentally depends on economic fundamentals.

Looking to the future: under the influence of the weak US dollar, the RMB maintains the expectation of appreciation in the short term. After the epidemic is basically under control, the Federal Reserve may adjust its monetary policy, and the probability of a stronger dollar may increase. The medium-term adjustment probability of A-shares is coming to an end, and the enthusiasm of market funds for A-shares is picking up recently. Investors are advised to avoid short-term irrational investment behavior and allocate assets reasonably around their long-term investment goals. In the long run, foreign capital may continue to flow into the A-share market, and equity products are still worth looking forward to!

Blackrock: the ECB is likely to maintain a loose policy this year and tactically allocate risky assets

While the momentum of economic restart is expected to continue to increase, we expect the ECB's current pace of asset purchases to remain the same. Because the ECB is focused on maintaining a loose fiscal environment, we will not regard the decision to slow asset purchases as a sign of policy bias towards hawks. We believe that the Fed will also continue to maintain a loose fiscal policy, which may be good for European equity risk assets. In this case, a widening of bond spreads around the euro zone could be a good opportunity to enter the market.

Goldman Sachs Group: commodities are better hedging tools than stocks

Commodity investors do not need to worry about the Fed's tough stance or the flattening of the yield curve, because historically, in an environment of rising and flattening interest ratesCompared to stocks, bonds or corporate creditCommodity returns have been good.

Goldman Sachs Group pointed out that stock prices reflect expected earnings and economic growth expectations, which makes them a good hedge against expected inflation. However, once inflation expectations become worrying enough to raise interest rates, the stock market is no longer a good hedge against inflation. By contrast, the price of commodities, as spot assets, depends only on the level of demand relative to the current level of supply. As a result, they can withstand short-term, unexpected inflation, which is generated by rapid economic expansion, with demand for certain inputs, such as materials and labour, exceeding supply.

During periods of large fluctuations in energy prices, the relationship between short-term CPI and commodities will strengthen, which is related to the physical nature of commodities, because large fluctuations in commodity prices are closely related to fluctuations in stocks and high volatility in spot prices. Goldman Sachs Group expects commodity prices to continue to rise even after the slowdown in the second quarter of 2021, precisely because the current inflationary background is driven by a wide distribution of demand for physical goods.

CITIC: Hong Kong stocks are not "light" in the off-season, and domestic investors continue to buy the consumer track.

CITIC said that in May 2021, the quiet Hong Kong stock market continued its rally since the second quarter, with the main flagship index: the Hang Seng Index / State-owned Enterprises Index rising 1.5 per cent and 0.6 per cent respectively, ranking in the middle of the world's major stock indexes. During the quiet period, the Hong Kong stock market continued the previous structured market of pro-cyclical + consumer medicine. The high price of upstream industrial metals and crude oil promoted the strong performance of the pro-cyclical plate of Hong Kong stocks, led by Hang Seng raw materials and energy sectors.

As the market stabilized, southbound funds continued their previous allocation preference in May, focusing more on the new economy sector with valuation callbacks in place, while adding consumption, medicine and so on. Among them, sportswear, beer in the consumer plate, computers and consumer electronics in the technology plate have obviously increased their southward capital holdings.

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