Optimistic outlook for interest rate cuts, US stocks, gold, silver, and crude oil all rise | Overseas major asset weekly report
Investors have fully anticipated that the Federal Reserve will cut interest rates twice before the end of the year
After the non-farm data was released from July 1st to 5th, US stocks and bonds rose while the US dollar came under pressure. The US bond market sharply rebounded after realizing the "data detail" of a massive 110,000 job cut in the previous two months, making the yield curve steeper.
Investors are optimistic about the prospect of a Fed rate cut. The CME FedWatch Tool shows that the probability of a 25 basis point rate cut in September has increased from 66.5% to 71.1%, the likelihood of the first rate cut in November has also risen, and the probability of a second rate cut in December has increased to 46.5%. Investors are fully expecting the Fed to cut rates twice before the end of the year.
This week, the three major broad-based indices in the US saw gains, with the S&P 500, Nasdaq, and Nasdaq 100 all hitting new closing highs. The Philadelphia Semiconductor Index's P/E ratio rose to 55.6, further increasing valuation levels. Currently, the Schiller P/E ratio for the S&P 500 has rapidly risen to 36.25, significantly higher than the historical average of 17.13 and median of 15.98, exceeding the historical average and median by two times. US stock valuations are high, and the overall market is likely to experience volatility in the near future.
With the second round of elections in the French National Assembly approaching, the uncertainty and changes in French economic policies may pose challenges to the market. In addition, the results of the UK House of Commons elections this week also had some impact on the European markets on Friday. Considering the relatively weak European economy, as well as the uncertainty in European policies, the current valuation advantage in the European markets is not significant.
The Nikkei 225 Index continued its rebound this week. However, the issue of pressure on the Japanese yen exchange rate has not been resolved, and Japan's monetary policy is tending towards further tightening. As the timing of the Fed rate cut still needs further confirmation, it is expected that overseas emerging market indices such as the Mexico MXX, Brazil IBOVESPA, India SENSEX30, Indonesia Composite Index, and MSC Vietnam, which have seen significant gains in the previous period, will still need to wait for a clearer signal of a Fed rate cut. Keep a close eye on Powell's important speech next week and US inflation data.
This week, the Euro rose 1.29% against the US dollar, the British Pound rose 1.46% against the US dollar, and the offshore Renminbi against the US dollar rose by 150 points or 0.2% before the US stock market opened, briefly breaking through 7.28 yuan, erasing most gains during US trading hours and returning to the 7.29 yuan level, still not far from an eight-month low. The US dollar fell below the 161 level against the Japanese Yen.
In terms of commodities, the strengthening of rate cut expectations due to the US employment report has reduced the opportunity cost of holding interest-free gold assets, putting pressure on the US dollar and supporting the rise in precious metal prices, while industrial metals in London have generally risen. International crude oil prices fell across the board, but due to a larger-than-expected drop in crude oil inventories indicating an increase in demand, oil prices have risen for the fourth consecutive week