A week that will change history is coming!

From November 4 to November 8, a summary of major financial events for the week, all in Beijing time:

Key focus this week: The 12th meeting of the Standing Committee of the 14th National People's Congress, the 2024 U.S. presidential election, the Federal Reserve's interest rate decision, China's release of October import and export, foreign exchange, and inflation data, and the Eurozone's release of September PPI and September retail sales data.

In addition, central banks from multiple countries including the UK, Australia, Canada, Norway, and Brazil will also announce their latest interest rate decisions. China will release the October Caixin Services PMI, and October financial data will be released at irregular intervals. Eurozone countries will announce the final values of the October Services and Composite PMIs, and the 7th China International Import Expo will open.

The Standing Committee of the National People's Congress as a "key window" for the implementation of incremental policies

According to Xinhua News Agency, the 12th meeting of the Standing Committee of the 14th National People's Congress will be held in Beijing from November 4 (Monday) to 8 (Friday). According to the chairman's suggestion, it will review the State Council's report on financial work and a comprehensive report on the management of state-owned assets for 2023.

On September 26 this year, the Central Committee held a rare non-routine Politburo meeting to study economic work, launching a package of incremental policies to promote sustained economic recovery. As policies are gradually implemented, market confidence has been greatly boosted, with expectations for more incremental policies to follow.

At a press conference held by the State Council Information Office on October 12, Finance Minister Lan Fo'an stated that the central government still has considerable room for borrowing and increasing the deficit, planning to increase the debt limit significantly in one go, which is the largest measure to support debt reduction in recent years, but did not disclose the specific scale.

The market generally expects that this meeting of the Standing Committee will review specific arrangements for the issuance of additional government bonds and the scale of local debt reduction, which will be a "key window" for the implementation of more incremental policies.

Liu Dian, a distinguished associate researcher at Fudan University's China Research Institute and director of the Public Affairs Department at Guan Media, analyzes that the Standing Committee of the National People's Congress, as the permanent body of the National People's Congress, exercises national legislative power, and will be the "decision-making" stage for the implementation of a series of important measures.

Liu Dian believes that, in addition to the debt reduction topic, economic targets and whether the 3% fiscal deficit rate red line will be breached are also worth paying attention to.

Brace for the storm! Results of the 2024 U.S. presidential election to be announced

The final voting for the 2024 U.S. election will begin on November 5 (Tuesday), and the election results are expected to be basically finalized by noon on the 6th Beijing time.Currently, the election situation is tense. Although polls show that Republican presidential candidate Trump and Democratic presidential candidate Harris are evenly matched, the betting market is wagering on Trump's victory. The "Trump trade" has been heating up since late October, but the overall market sentiment remains cautious.

The team led by Liu Gang at China International Capital Corporation analyzes that the market reacted strongly to Trump's "unexpected" victory in 2016, but this time is different. The current macroeconomic fundamentals of China and the U.S. are different, and the monetary policies of the Federal Reserve are also different; in 2016, the U.S. was in the early stages of interest rate hikes, whereas now it is in a rate-cutting cycle. If U.S. Treasury yields rise sharply before and after the election, it could provide short-term trading opportunities, with a strong dollar and gold serving as a hedge against overextension.

According to an analysis by Chen Li and others at Soochow Securities Co., Ltd., there are four possible scenarios for the election results, which may have the following impacts on asset prices:

Scenario 1: Republican sweep (43%), U.S. stocks > dollar > gold > U.S. Treasuries. On one hand, Trump would be able to more smoothly implement his policy proposals, significantly cutting taxes for domestic companies and relaxing regulations, which would favor U.S. stocks through more "America First" policies; on the other hand, policy resonance (increased tariffs + tightened immigration) would increase re-inflationary pressures in the U.S., potentially benefiting the dollar, while this would lead to selling pressure on the long end of the Treasury market.

Scenario 2: Trump + Republican Senate, Democratic House (15%), U.S. stocks > dollar = gold > U.S. Treasuries. Trump would face a split with the House of Representatives, which holds "fiscal power," limiting his policy space. This means that his foreign tariff and domestic tax reduction policies would be harder to recommend, reducing the likelihood of further tax cuts for companies, leading to only moderate increases in U.S. stocks.

Scenario 3: Democratic sweep (14%), dollar and U.S. stocks weaken. Considering her tax increases on corporations would hurt U.S. stock earnings and the impact of taxing the wealthy on risk appetite, this would create significant pressure on U.S. stocks overall. Additionally, if the economy falls into recession, the dollar would weaken. However, Harris's fiscal policy is not aggressive, so there would not be significant debt increases, resulting in less upward pressure on Treasury yields compared to a Trump victory scenario.

Scenario 4: Harris + Republican Senate, Democratic House (24%), U.S. stocks may perform weakly. The House plays a significant role in controlling government spending, so a unified House and presidency would facilitate the implementation of Harris's fiscal policies, such as increasing taxes on corporations. Based on this, there would be short-term pressure on U.S. stocks, but opportunities could be sought structurally. Other assets would perform neutrally.

Li Yujie from China International Capital Corporation also believes that for assets, whether in the scenario of a "Republican landslide" or "Trump + Democratic House," it is more likely to lead to rising U.S. Treasury yields, a stronger dollar (but attention should be paid to administrative interventions pushing for competitive devaluation of the dollar), and even though high interest rates may suppress it, gold would still show allocation value due to its safe-haven characteristicsThe difference is that under the scenario of a "complete Republican victory," economic growth is better, the boost to U.S. stock earnings is greater, and the rise in U.S. Treasury rates may also be higher.

Federal Reserve Decision Heavyweight Finale, Is a 25 Basis Point Rate Cut "Set in Stone"?

On Friday (November 8), the Federal Reserve will announce its latest interest rate decision, with the market widely expecting a 25 basis point rate cut, lowering the federal funds rate to a range of 4.5%-4.75%.

Pricing in the federal funds futures market shows that the market has almost fully absorbed the expectation of a 25 basis point rate cut, with the probability of a 25 basis point cut reaching 95.7%.

This week's PCE inflation and non-farm data are expected to be important references for Federal Reserve officials in making their decision.

In terms of inflation data, the U.S. core PCE price index in September rose 2.7% year-on-year, up 2.1%, in line with expectations, the lowest level since early 2021; the core PCE price index in September rose 2.7% year-on-year, matching the previous value, exceeding the expected 2.6%.

In terms of non-farm data, the U.S. non-farm payrolls in October saw a sharp drop to 12,000 from 254,000 in September (revised down to 223,000), the lowest level since 2020, and far below the expected 100,000, with an unemployment rate of 4.1% in line with expectations.

Nick Timiraos, a Wall Street Journal reporter known as the "new Federal Reserve correspondent," stated that the analysis of this employment report can be "subjective," with most Wall Street analysts believing that the poor data is mainly due to two hurricanes in October and the Boeing strike, but some analysts are concerned that the job market is indeed deteriorating. Almost all analysts believe that this report will not affect the expectation of a 25 basis point rate cut by the Federal Reserve this month.

Economists have indicated that the main point of contention among Federal Reserve decision-makers may be whether to pause rate cuts. A Federal Reserve observer stated that this will ultimately depend on whether Federal Reserve Chairman Jerome Powell can maintain consensus among the Fed officials on rate cuts.

Federal Reserve officials have hinted in previous speeches that they prefer a "gradual" approach to rate cuts, which aligns with market expectations. Minneapolis Fed President Neel Kashkari stated that he is considering "moderate" rate cuts in the "coming quarters," while Kansas City Fed President Jeff Schmid expressed a preference to "avoid large rate cuts."

China's October Import and Export, Foreign Exchange, and Inflation Data

On Thursday (November 7), the General Administration of Customs of China released China's October import and export data, and the People's Bank of China released October foreign exchange reserve data.The data released last month shows that in September, affected by extreme weather, global shipping disruptions, and a high base from the same period last year, China's export and import growth rates both slowed down. In dollar terms, China's exports in September increased by 2.4% year-on-year to USD 303.71 billion, down from a previous growth of 8.7%; imports increased by 0.3% year-on-year to USD 222 billion, down from a previous increase of 0.5%; the trade surplus was USD 81.71 billion, down from a previous USD 91.02 billion.

The General Administration of Customs stated that the slowdown in export growth in September was mainly due to some short-term sporadic factors, which is considered a normal data fluctuation in the short term.

Guosheng Macro believes that the year-on-year export growth in September was significantly lower than expected and also below seasonal levels. In addition to the base rebound, there are two disturbances: first, external demand has further weakened, with the global manufacturing PMI remaining below the boom-bust line for three consecutive months in September and further declining; second, extreme weather such as typhoons has had an impact.

Looking ahead, Guosheng Macro believes that current global manufacturers' concerns about economic risks have increased, leading to a contraction in orders and production. It is expected that external demand will continue to slow in Q4; Q4 PPI in China is expected to fluctuate at a low level, with prices unlikely to provide additional support for exports; moreover, the rising base will also drag down export figures, with a high probability of a slight decline in exports in Q4. There is considerable uncertainty regarding China's exports in 2025.

On Saturday (November 9), the National Bureau of Statistics will release the CPI and PPI data for October.

The data released last month shows that China's CPI in September rose by 0.4% year-on-year, down from 0.6%, and remained flat month-on-month; the year-on-year decline in PPI expanded to 2.8%, with a month-on-month decrease of 0.6%, narrowing from a previous value of -0.7%.

Specifically, influenced by the back-to-school season and the Mid-Autumn Festival, prices for fresh vegetables, eggs, fresh fruits, and pork rose by 4.3%, 2.5%, 2.1%, and 0.4%, respectively; affected by fluctuations in international commodity prices and insufficient effective domestic demand, the month-on-month decline in PPI narrowed while the year-on-year decline expanded.

Zhongjin Fixed Income analysts Geng Anqi, Fan Yangyang, and others believe that looking at the fourth quarter, regarding PPI, under the backdrop of a new round of macro incremental policies being introduced, market expectations for the macro economy have improved, and industrial product prices have rebounded. However, considering that the recovery in real estate is still relatively slow, we expect the rebound space for industrial product prices may be relatively limited; regarding CPI, it will still take a long time for stimulus policies to be transmitted to residents, and short-term insufficient resident income may continue to drag down core inflation, while the support of food prices for inflation may gradually weaken. We expect consumer prices to remain low

China's October Financial Data to be Released Irregularly

Between November 9 and 15, China will release financial data for October, including social financing and new RMB loans, at irregular intervals.

The data released last month showed that in September, China's new social financing was 3.76 trillion yuan, and new RMB loans were 1.59 trillion yuan. The rebound in the stock market drove the M2 growth rate back up to 6.8%, while the negative spread between M1 and M2 growth rates widened.

CITIC Securities analysis indicated that the social financing in September met expectations, but credit demand remained weak, with government bonds providing strong support. Due to a high base and insufficient effective credit demand, the year-on-year increase in credit continued to be lower than in previous years, with the incremental amount falling below the average level of the past five years. On the corporate side, there was insufficient real demand, and bills continued to surge. On the retail side, the ability and willingness of residents to leverage remained weak, but the phenomenon of early repayment eased somewhat after the reduction in existing mortgage rates.

Huaxi Securities believes that three indicators of marginal change are worth noting: First, the year-on-year rebound in M2 may mainly reflect the fund transfer effect brought about by improved equity market sentiment; second, fiscal deposits reflect a significant level of fiscal expenditure; third, corporate bond financing has significantly declined, mainly affected by the adjustment in the credit bond market in September.

Other Important Data, Meetings, and Events

On Tuesday (November 5), S&P Global released China's October Caixin Services PMI and Composite PMI.

The data released last month showed that China's September Services PMI was 50.3, down 1.3 percentage points from August, marking the lowest level since October 2023, indicating that the prosperity of China's service industry continues to decline within the expansion range, with the pace of service industry expansion continuing to slow; at the same time, the September Caixin China Manufacturing PMI was recorded at 49.3, down 1.1 percentage points from August, falling below the threshold of 50 again, marking the lowest level since August 2023.

Specifically, the expansion of supply and demand in the service industry slowed in September, with a slight improvement in employment, increased cost pressures for enterprises, but due to insufficient demand and intensified competition, they had to lower prices, leading to a decline in market confidence to historical lows.

On Wednesday (November 6), the Eurozone released September PPI year-on-year and month-on-month data.

Previously, the Eurozone's August PPI saw its first "warming" this year, rising from a previous value of -0.5% to an increase of 0.6%, in line with expectations; however, the year-on-year PPI for August fell by 11.5%, which was basically in line with expectations, with the previous value showing a decline of 7.6%.

Specifically, the Eurozone's August PPI compared to July showed that energy costs rose by 2.5%, prices for capital goods (such as machinery, tools, or buildings) and non-durable consumer goods remained stable, while prices for durable consumer goods fell by 0.1%, and prices for intermediate goods fell by 0.4%Excluding energy, the year-on-year increase in the PPI for August slowed to 1%, down from 1.6% in July, and decreased by 0.2% month-on-month.

The 7th China International Import Expo will be held in Shanghai from November 5 (Tuesday) to November 10 (Sunday).

At the press conference of the State Council Information Office on October 23, Assistant Minister of Commerce Tang Wenhong introduced that the 7th China International Import Expo will be held in Shanghai from November 5 to 10, with the theme "New Era, Shared Future." During the same period, the Hongqiao International Economic Forum will also be held, including a main forum and 19 sub-forums.

The Ministry of Commerce stated that currently, all preparatory work is basically ready, with a total exhibition area exceeding 420,000 square meters. A total of 152 countries, regions, and international organizations will participate in the national and enterprise exhibitions. The enterprise exhibition continues to maintain an oversized scale of over 360,000 square meters, with 3,496 exhibitors from 129 countries and regions participating. Both the number of countries (regions) and enterprises exceed the previous session, with 297 Fortune Global 500 and industry-leading companies participating, setting a new historical high.

New Investment Opportunities

During the week (November 4 - November 8), there will be 2 new stocks available for subscription in the A-share market, and 2 new stocks will be listed in the Hong Kong stock market.

A total of 35 new funds (combined statistics for Class A and Class C) were issued during the week, including 8 bond funds, 2 mixed funds, 2 equity funds, 12 index funds, and 1 REIT.