Global news： US economy soft landing is cloudy again, Nasdaq stops rising for seven consecutive days. Liu He talks with US Treasury Secretary Yellen
On Wednesday, local time, the US stock market ended its previous continuous rebound trend, with the three major indexes all falling more than 1%, and the Nasdaq index stopped rising for seven consecutive days. Economic data show that inflation in the United States is indeed falling, but the fear of recession is endless, and the wave of layoffs of large technology companies continues, and the expectation that the US economy will enter recession is getting stronger and stronger.
Specifically, the PPI in December increased by 6.2% year-on-year, the smallest increase since March 2021 and -0.5% quarter-on-quarter, the largest decline since April 2020, indicating that inflation is accelerating. At the same time, retail sales in the United States fell more than expected in December, down 1.1% from the previous month, the biggest drop in a year.
The data shows that inflation is indeed easing, but it also proves that the Fed’s interest rate hike is already taking effect, and curbing demand also casts a shadow over the US economic outlook.
Analysts pointed out that the economic data is good news for the Fed, and the slowdown in demand and producer inflation at the end of the year is a positive sign, indicating that the Fed’s aggressive interest rate hike policy has produced practical results in fighting inflation. However, the market is far from reflecting the coming recession, and it is currently in the transition period between the bear market driven by interest rates in 2022 and the bear market driven by poor corporate profitability in 2023.
Overnight, a number of Fed officials put on hawks again, stressing that further interest rate hikes are still needed, and the market may gradually switch to a recession trading style.
In important news, according to Xinhua News Agency, on the morning of January 18th, Vice Premier the State Council and Chinese leader of China-US Comprehensive Economic Dialogue Liu He held a half-day meeting with US Treasury Secretary Yellen in Zurich, Switzerland. The two sides conducted professional, in-depth, frank and pragmatic exchanges on the global and two countries’ macroeconomic and financial situation and coping with global common challenges around the implementation of the important consensus of the first meeting between China and the United States in Bali. The talks were constructive.
In other news, Federal Reserve Chairman Powell tested positive for COVID-19 on Wednesday, and his symptoms are mild. He has been vaccinated with COVID-19 vaccine and booster shots. Powell is currently isolated at home and telecommuting.
Microsoft will lay off 10,000 people by the end of the third quarter of fiscal year 2023. Amazon laid off 18,000 people from Wednesday, the largest in the company’s history. Bank of America plans to freeze most recruitment plans. Apple will expand its smart home product line and challenge Amazon and Google.
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Among the large Chinese stocks, Alibaba fell by 1.71%, Baidu by 3.60%, Netease by 0.63%, Tencent Music by 2.65% and Pinduoduo by 5.59%.
Among the large American technology stocks, Apple fell 0.54%, Amazon fell 0.61%, Google A fell 0.19%, and Nye soared 0.03%.
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The main contract of WTI crude oil closed at $79.41 per barrel, down 1.29%; The main contract of Brent crude oil closed at $84.64 per barrel, down 1.49%; The main contract of crude oil in the previous period closed at 554.40 yuan per barrel overnight, down 0.79%.
Overnight, the Shanghai gold main contract closed down 0.26% to 418.34 yuan per gram; The main contract of Shanghai Bank closed down 1.87% to 5208.00 yuan per kilogram.
[overnight news]
Liu He talks with US Treasury Secretary Yellen. China welcomes Finance Minister Yellen to visit China at an appropriate time this year.
According to Xinhua News Agency, the two sides believe that the world economic recovery is at a critical moment, and it is beneficial for China and the United States and the whole world to strengthen macro-policy communication and coordination and jointly meet challenges in economic and financial fields. The two sides discussed issues related to deepening cooperation in the macroeconomic and financial fields. The two sides recognized the importance of sustainable financial cooperation and agreed to strengthen cooperation under bilateral and multilateral frameworks such as the United Nations, G20 and APEC. The two sides agreed to continue to support green and low-carbon development and economic transformation in emerging markets and developing countries. China expressed its concern about the US economic, trade and technical policies towards China, and hoped that the US would pay attention to the impact of these policies on both sides.
Inflation in the United States accelerated and fell. In December, PPI hit its smallest increase since March 2021.
The PPI (producer price index) of the United States increased by 6.2% year-on-year in December, the smallest increase since March 2021, slower than the 7.4% in November and lower than the market expectation of 6.8%. In December, the PPI fell to -0.5% month-on-month, lower than the revised November data and lower than the market expectation of 0.1%, the biggest drop since April 2020. In December, the core PPI increased by 5.5% year-on-year, and it was 6.2% in November. The market expected 5.6%. The core PPI increased by 0.1% month-on-month, in line with expectations, lower than the 0.2% in November. The decline in PPI in December was driven by the sharp drop in commodity prices, especially energy and food prices, and the increase in service costs declined, up 0.1% from the previous month.
Federal Reserve’s Beige Book: There was little growth in economic activity at the end of 2022, and the price increase in 2023 is expected to be moderate.
According to the Beige Book, the economic activities of the Federal Reserve increased or declined slightly in most places, and only one Federal Reserve mentioned that the sharp decline in manufacturing led to the contraction of economic activities. Several local Federal Reserve said that the price increase slowed down, and retailers hinted that consumers were more sensitive to prices. It is widely expected that the price increase will be further moderate in the coming year. The job market is still tight, and the salary pressure continues to be high. Five local Federal Reserve Banks said that the pressure has slowed down to some extent.
A number of Fed officials delivered hawkish speeches.
In 2023, Logan, chairman of the FOMC voting committee and Dallas Fed, said that he supported the US to slow down the rate hike and the inflation level was too high, so it may be necessary to gradually raise interest rates until "convincing evidence" shows that the inflation rate is close to 2%. In 2023, the FOMC Voting Committee and Philadelphia Fed President Huck reiterated his support for raising interest rates by 25 basis points. He said that the Fed needs to raise interest rates above 5%. Cleveland Fed President Mester said that it is still necessary to raise interest rates further, and the policy interest rate should be "higher" than the range of 5%-5.25% predicted by policy makers at the end of 2023. St. Louis Fed President Brad said that even if inflation falls this year, the Fed will tend to keep interest rates at a high level to ensure that the task is completed and it can continue to shrink its balance sheet after stopping raising interest rates.
European natural gas stocks hit a record high
According to the data of European natural gas infrastructure, the inventory level of the whole EU has reached 81.07% of full load on January 17th, setting a new historical record, which is 40% higher than the average level in the last decade. Europe’s miraculous winter and record natural gas stocks have led the market to bet that the energy crisis is over.
[company news]
Microsoft officially announced that it will lay off 10 thousand employees, accounting for nearly 5% of the total number of employees
On Wednesday, Microsoft and Amazon launched tens of thousands of layoffs. Microsoft officially announced that it will lay off 10,000 employees by March 31st, accounting for less than 5% of the total number of employees. Microsoft will account for $1.2 billion in expenditure in the second quarter, which will reduce its earnings per share by 12 cents. Amazon’s latest round of layoffs also began on Wednesday, which is part of its more than 18,000 layoffs announced in early January.
More than 500 top advertisers have suspended their spending on Twitter since Musk entered Twitter.
According to media quoted sources, a senior manager of Twitter revealed at an internal meeting a few days ago that since Tesla CEO Musk took over Twitter in October last year, more than 500 advertisers have suspended spending on Twitter. Siddharth Rao, the manager, also told employees that the company’s daily revenue decreased by 40% compared with the same period last year.
Apple is said to expand its smart home product line to challenge Amazon and Google.
According to media quoted sources, Apple is developing a series of devices aimed at challenging Amazon and Google’s position in the smart home market, including new display screens and faster TV set-top boxes. Earlier, Apple relaunched a larger HomePod speaker.
Faraday will soar nearly 26% in the future.
Faraday Future (FF) closed up 25.71% on Wednesday, after the company announced that it had signed a strategic agreement with Huanggang, Hubei Province, to move its FF China headquarters to Huanggang.
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