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© Reuters. On June 21, 2021, a man looks at an electronic board displaying the Nikkei index outside a brokerage company in the business district of Tokyo, Japan. REUTERS/Kim Kyung-Hoon/Files
(Reuters)-
1/There are no prisoners in the bonded area
Bond bulls are prevalent, and they are not captured. The 10-year U.S. Treasury bond yield has fallen to 1.3%, marking the second largest one-day drop in 2021 on Tuesday. Yields in the UK and Germany are at their lowest levels in months.
It seems that reinflation is no longer dominant. This does not mean that investors will suddenly prepare for an economic slowdown. The message may be more that economic growth has peaked, and any rise in inflation will prove to be temporary.
Concerns about China’s prospects and the surge of coronavirus variants have increased caution, and the European Central Bank has just adjusted its inflation target, which is another sign that it will remain dovish.
Many people bet on high yields because inflation returns are forced to go back in order to reduce losses—another warning to those considering a four-year bond rally.
-Rethinking that deflation has put the bond market in trouble
2/Chinese contradiction
As Beijing’s newly appointed China Cyberspace Affairs Office further cracks down on its heavyweights, China’s technology industry is taking a heavy hit.
The latest target, the ride-hailing giant Didi Global, has lost a third of its market value in a week since it went public in New York. Due to the overall changes in data and fundraising rules, others also fell sharply.
Investors are nervous: Is China opening up or forcing companies to return home? Is Beijing reducing monopolies and controlling data, or is it trying to reduce risks and raise standards?
There are other problems. Although the second quarter GDP data released on Thursday may confirm a slight decline in momentum after the bumper harvest in the first quarter, the economy will continue to move forward. But the unexpected announcement that Beijing may lower the bank deposit reserve ratio may not be good for some people.
The People’s Bank of China conducted such an interest rate cut on Friday, which will release about 1 trillion yuan (154 billion U.S. dollars) of long-term liquidity to support the economic recovery after the COVID-19.
-Update 1-China cuts deposit reserve ratio to support economic recovery
-EXPLAINER-Is China about to cut its RRR? What is the impact? ——China’s powerful Internet regulator shows muscle through Didi investigation
3/ Business inspections Since the pain caused by the coronavirus last year, the rebound in US corporate profits may establish a high level for the second quarter earnings season. According to data from Refinitiv IBES, overall, the company’s earnings are estimated to have increased by 65.4% year-on-year, which may be the largest percentage increase since the fourth quarter of 2009, when the company was emerging from the financial crisis. However, expectations of a slowdown in economic growth in the second half of 2021 have recently spurred a rebound in US Treasury bonds, causing the benchmark 10-year yield to fall to its lowest level since February.
Banks are focusing on this week’s performance. Goldman Sachs (NYSE:), JPMorgan Chase (NYSE:) and Bank of America (NYSE:) will release reports. Delta Air Lines (NYSE code:), UnitedHealth Group (NYSE code:) and Kansas City Southern Airlines (NYSE code:) also reported.
-PREVIEW-Bank of America will see a substantial increase in profit in the second quarter before its performance returns to normal
4/ Talk
On Wednesday and Thursday, Fed Chairman Jerome Powell (Jerome Powell) held a biannual gathering with the US Congress, and this gathering couldn’t be more timely.
His view on why the bond market seems to suddenly abandon reinflation trading is a problem that every global investor is currently trying to solve, so please listen.
Elsewhere, the Bank of Japan is unlikely to abandon its hypersupport policy when it meets on Friday.
Although the Bank of Canada expects to cut its monthly bond purchase plan of 3 billion Canadian dollars to 2 billion Canadian dollars. In emerging markets, the focus on Wednesday will be on Turkey, where rising inflation has made it difficult for the central bank governor to implement the interest rate cuts that President Tayyip Erdogan hired him to implement.
-The Bank of Japan expects to lower its growth forecast for this year due to COVID-19 restrictions damaging the outlook
5/ Oil Edge Technology
The public quarrel between Saudi Arabia and the United Arab Emirates over OPEC+ has put the oil market in trouble.
Riyadh and Abu Dhabi disagree on a proposed transaction that will include the supply of more oil to the market-which may cool the rise of prices to a 2-1/2-year high. Russia is trying to mediate, but no new talks have been scheduled yet.
If no agreement is reached, the default is to keep output unchanged, which may push up prices. But others pointed out that the lack of cohesion across the group may cause members to increase output and ignore output targets, which may depress prices.
Either way, one thing is certain: there will be more volatility in the future.
-Saudi Arabia-UAE is still at an impasse because Russia stepped in to save OPEC+ agreement
($1 = 6.4831 renminbi)
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