TF SECURITIES: Expectations of US interest rate cuts increase, focus on whether Sino-US policies can resonate

According to the Wise Finance app, TF Securities released a research report stating that the expectation of a US interest rate cut has increased, focusing on whether Chinese and American policies can resonate. It continues to favor "patient assets" with high dividends, and new quality productivity may have performance opportunities. It is optimistic about the continued evolution of high dividend styles in the future, with a new round of diffusion within the dividend sector. The new "Nine Articles of the State" mentions "market value management" and "increasing the return on investment in the secondary market." Under the resonance of policy logic and market logic, high dividend assets with monopolistic and scarcity characteristics are expected to be revalued.

Market Thoughts: Expectation of US Interest Rate Cut Increases, Focus on Whether Chinese and American Policies Can Resonate

1. The June US inflation data was released, with overall inflation in the US cooling down. Looking at the sub-items, the CPI energy sub-item continued to record negative values month-on-month, core service inflation continued to decline, and the rental sub-item fell for the first time since February. Powell's previous remarks had raised expectations of an interest rate cut, and after the release of comprehensive inflation data, the expectation of a rate cut in September increased again. After the release of inflation data, market speculation about a rate cut intensified, with US bond yields, the US dollar index weakening, US stocks diverging, and small-cap stocks rebounding. 2) Looking ahead, a US interest rate cut trade may improve global liquidity, benefiting the performance of A-share denominator, and with domestic policy easing space opening up, it boosts market risk appetite. However, attention should also be paid to the timing of the transition from rate cut speculation to realization. In addition, the evolution of the rate cut trade still needs to closely monitor June PCE inflation data, Q2 US GDP preliminary data, August FOMC interest rate meeting, US presidential election, as the rate cut is not certain, there may still be disturbances ahead. The subsequent Third Plenum and the July Political Bureau meeting may once again become the main focus, so it is necessary to pay attention to whether there is resonance in the interpretation of Chinese and American policies.

Domestic: June Inflation and Social Financing Decline, Export Recovery

1. In June, CPI fell month-on-month, PPI year-on-year decline narrowed, core CPI remained stable, and the PPI-CPI scissor gap narrowed. Regarding CPI, the decline in food prices widened, while non-food items remained stable. As for PPI, the decline in producer prices narrowed, and the decline in consumer prices remained stable. 2) In June, export growth continued to recover, while imports declined. Exports (denominated in US dollars) increased by 8.6% year-on-year, up from 7.6% previously, while imports increased by 3.9%, down from 5.1% previously. In terms of exports, most categories saw a rebound, with electronic information products, resource products, and downstream consumer goods generally rebounding. In terms of imports, most categories saw a decline. 3) In June, the increment of social financing was 3.3 trillion yuan, and the social financing pulse index fell to 24.83%. Structurally, the increase in government bonds fell, and the three off-balance sheet items turned negative. In terms of credit structure, the year-on-year growth of medium and long-term loans to enterprises and residents showed a slight increase. 4) In terms of high-frequency indicators for transportation, the subway passenger volume index rebounded, and the freight volume index also rebounded. 5) The industrial production boom index fell, while caustic soda rebounded, and Shandong refining, polyester filament, methanol, tires, and Tangshan blast furnaces declined. 6) Domestic policy tracking: The People's Bank of China will conduct temporary reverse repurchase or temporary reverse repurchase operations as needed, and the China Securities Regulatory Commission has suspended securities lending and borrowing business in accordance with the law, further strengthening counter-cyclical regulation of securities lending International: US Inflation Falls Across the Board in June

2. Tracking the Russia-Ukraine Conflict: NATO countries issue a joint statement pledging to provide more air defense systems to Ukraine; NATO sets conditions for Ukraine's accession, with Poland reiterating that Ukraine "must win the war." 2) Tracking the Israel-Palestine Conflict: Military operations by the Israeli military in the Gaza Strip continue before ceasefire negotiations resume; Hezbollah in Lebanon states that they will cease fire with Israel if Gaza stops; Israeli Prime Minister states that military operations against Hamas will continue "until all objectives are achieved." 3) In the US, inflation fell across the board in June, with the core CPI excluding food and energy also declining. Prior to the release of inflation data, Powell stated during a hearing at the House Financial Services Committee, "We will return to a 2% inflation level, and I am quite confident about this. There is no need to wait for the inflation rate to drop to 2% before starting to cut interest rates." According to CME's "FedWatch," as of July 13, 2024, the probability of the Fed cutting rates by a cumulative 25 basis points until September is 90.3%