The U.S. stock market experienced "Black Thursday", and it fell overnight after the violent rebound after the interest rate hike landed the previous day.

Under the panic, the US dollar index rose sharply, returning to above 103, approaching the 104 mark.

  A slump in U.S. stocks caused Asia-Pacific markets to tumble early in the session.

On May 6, the central parity of the RMB against the US dollar was lowered by 660 points from the previous day to 6.6332, and the central parity depreciated to the lowest level since November 5, 2020.

After the market opened, the offshore RMB quickly fell below the 6.7 mark.

As of 9:40 Beijing time on the 6th, USD/CNH was at 6.7199, and USD/CNH was at 6.6861.

Hong Kong's Hang Seng Index fell more than 2%, while the Shanghai Composite fell more than 1.3%.

  In overnight trading, the Dow once fell by more than 1375 points, and the Nasdaq fell by more than 6%.

At 16:00 EST on May 5th (04:00 on May 6th, Beijing time), the Dow closed down 1063.09 points to 32997.97 points, a decrease of 3.12%; the Nasdaq closed down 647.17 points to 12317.69 points, a decrease of 3.12%. 4.99%; the S&P 500 closed down 153.30 points at 4146.87 points, or 3.56%.

The US stocks rose sharply on Wednesday, the Dow closed up 932.27 points, the Nasdaq closed up 401.10 points, and the S&P 500 closed up 124.69 points.

  "Today is completely 'kill more'. Not only growth stocks, but even oil stocks with strong fundamentals have been brought down, which is really unexpected. The market seems to have no fundamental linkage, purely because of lack of liquidity." Senior global macro trader Yuan Yuwei told the first financial reporter.

  Large tech stocks in the U.S. stocks fell across the board on that day. Apple fell 5.57%, Amazon fell 7.56%, Netflix fell 7.69%, Google fell 4.71%, Facebook fell 6.77%, and Microsoft fell 4.36%; US stocks and bank stocks fell across the board, and JPMorgan Chase fell 2.39 %, Goldman Sachs fell 3.36%, Citi fell 1.7%; most US energy stocks fell, Exxon Mobil fell 1.47%, Chevron fell 0.75%, ConocoPhillips fell 0.86%, Schlumberger fell 1.2%, Occidental Petroleum Up 1.07%; most popular Chinese concept stocks fell, Dingdong Maicai fell 21.62%, Ebang Communication fell 15.32%, iQiyi fell 13.33%, Pinduoduo fell 11.18%, Bilibili fell 10.68%, Alibaba fell 6.65%, Jingdong fell 6%, and Baidu fell 5.96%.

  Situ Jie, a partner of Qingxi Capital and a senior US stock trader, told reporters, "The situation is very similar to the market after the first interest rate hike in December 2015. On the day the interest rate hike was announced, the market closed up and fell sharply the next day. Afterwards, A-shares melted in early 2016, and then U.S. stocks adjusted for two months." He said, "Currently, the weekly S&P 500 index shows a 'head and shoulders' pattern, which is technically bearish."

  China Business News reported a few days ago that traders and strategists from several institutions told reporters that the alarm has not been dismantled, and risks such as geopolitical risks, energy shortages, and repeated epidemics will still disrupt the market. The meeting will sharply raise interest rates by 50BP, and market volatility will increase.

Uncertainty ahead remains high and vigilance is required.

  Geopolitical risks cannot be underestimated.

Fu Xiao, head of commodity market strategy at BOC International, told reporters that proposals to ban Russian crude oil and petroleum products are being discussed within the EU, including phasing out Russian crude within six months.

Affected by this, the market has increased concerns about the decline in Russian exports, supporting the rise in oil prices.

However, the Biden administration of the United States plans to conduct a procurement tender for 60 million barrels of crude oil this fall, and the price of the main ICE Brent contract once reached $114, an intraday increase of $4.

Subsequently, the U.S. dollar index strengthened, and the prices of risky assets began to correct. The main contract of ICE Brent once fell to $102.

The backwardation (forward discount) structure of the forward curve strengthened, and the spread of the 2207/2208 contract widened by about 20 cents, indicating that concerns about falling Russian supplies supported the forward structure.

  "The U.S. GDP has experienced negative growth in the first quarter. Although there are some seasonal factors (companies accelerate inventory replenishment), if there is another quarter of negative growth, this has already met the technical definition of 'recession'. In addition, the epidemic, the situation in Ukraine, etc. Challenges still exist, and the market cannot rule out that it will be under pressure after short covering." City Index senior analyst Sika Moore told reporters that taking the Nasdaq index as an example, rising interest rates are even more detrimental to the constituent stocks of the index. , but there may also be a short-covering rebound in the short term, and traders tend to look for selling opportunities later.

  Another foreign bank trader told reporters that Powell said that he did not actively consider the option of raising interest rates by 75BP, which once pushed U.S. stocks soared on Wednesday.

But does the market really believe it?

“USD/JPY sold off sharply after announcing that a 75BP rate hike was off the table, from a high of 130.37 to a low of 128.62. However, overnight, USD/JPY regained all of its lost ground.”

  He mentioned that the U.S. core CPI increased by 6.5% year-on-year in March, the highest level since August 1982.

Overnight, the U.S. reported nonfarm labor costs for the first quarter, with an overall increase of 11.6% versus 9.9% expected, compared with just 1% in the fourth quarter of 2021, also one of the highest readings in 20 years.

Beijing time Friday evening, the United States will release non-farm payrolls data.

Not only will the Fed be looking at nonfarm payrolls, which are projected to increase by 395,000, but also average hourly earnings growth, which is currently expected to rise 0.4% month-on-month.

  For now, the dollar appears to have upside momentum.

Matt Weller, head of global research at GAIN Group, previously told reporters, "The global reserve currency is testing the 103.00-103.80 resistance band at its nearly 20-year high. If the dollar index stands at 103.80, it is expected to open up room for upside. At the end of the day or continue to attack the 105.00 level or even higher.”

  The price difference between offshore and onshore RMB remained above 300 points, indicating that there are certain short positions in the offshore market.

However, reporters have previously reported that the RMB may be temporarily under pressure, but institutions do not believe that there will be a sharp depreciation.

At present, the momentum of capital outflow from China's stock and bond markets has slowed down significantly compared with February and March, and the People's Bank of China still has a lot of room for policy, such as raising the foreign exchange reserve ratio and issuing central bank bills in the offshore market.

According to Datayes, the net outflow of northbound funds since the beginning of this year was 20.39 billion yuan, but it turned into a net inflow in April. The total net sales of Shanghai Stock Connect was 3.444 billion yuan, and the total net purchase of Shenzhen Stock Connect was 9.745 billion yuan.

  As far as A-shares are concerned, Meng Lei, a China strategist at UBS Securities, told reporters that although profit pressure still exists, the first-quarter earnings of A-shares in 2022 will return to a slight positive growth.

The year-on-year growth rate of earnings in the midstream and upstream materials industry slowed down in the first quarter, but the absolute value remained at a high level, while many downstream industries experienced negative earnings growth under cost pressure.

In addition, affected by the downward cycle of real estate and the repeated epidemics, industries related to real estate and travel also experienced negative earnings growth in the first quarter.

  Goldman Sachs recently stated that its previous position of overweighting Chinese stocks remains unchanged, with favorable policy cycles, weakened supervision, low valuations and low overall positions (global mutual funds’ allocation to Chinese stocks is 430 basis points lower than expected) etc. are the reasons.

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