Next week's heavy schedule: Will LPR cut interest rates? The US stock market's technology stock earnings season and the Olympics kick off, with the release of the Fed's favorite inflation indicator

July 22nd - July 27th Weekly Highlights of Major Financial Events, all in Beijing time:

Highlights of the Week: China's July LPR quotation, US second-quarter GDP, US June core PCE price index, Google and Tesla second-quarter reports, CATL interim report, 2024 Paris Olympics, Bank of Canada interest rate decision.

Will the July LPR Cut Interest Rates?

On Monday, July 22nd, the People's Bank of China announced the July LPR quotation. Will there be a rate cut? Since February this year, the LPR has remained unchanged for four consecutive months.

A CITIC Securities research report pointed out that with reference to overseas experience and recent policy statements, the LPR quotation mechanism may be improved, thereby enhancing policy efficiency and marketization. In the short term, the LPR quotation is also expected to be adjusted downwards to create more favorable policy conditions for credit recovery.

The latest report from Shenwan Hongyuan also indicated strong expectations for LPR mechanism reform and rate cuts: on one hand, the focus is on whether the LPR will decouple from MLF and OMO, thereby completing the policy rate reform and focusing more on short-term policy rates; on the other hand, considering the current significantly weak credit demand and the mid-year stable growth window in July and August, although the central bank continues to monitor long-term debt risks, the necessity of lowering the LPR remains strong.

The institution predicts that if the LPR is lowered this time, it is expected to drive a rapid downward phase in bond yields. Considering the central bank's low tolerance for rapid declines in long-term bond yields, it is not ruled out that the central bank may adjust long-term bond yields by borrowing and then selling government bonds, which is expected to significantly amplify fluctuations in long-term bond yields.

Will Google and Tesla Lead the Fate of Tech Stocks?

The US tech stock earnings season has begun, with Tesla and Google's parent company Alphabet set to release their earnings on Tuesday, July 23rd local time.

With the support of generative AI, Google is expected to continue its strong growth from Q1. Analysts expect Alphabet's second-quarter revenue to reach $70.55 billion, a year-on-year increase of 13.7%. Earnings per share are expected to be $1.85, a 28.5% increase from the same period last year.

As a key growth engine for the company, Google Cloud's second-quarter revenue is expected to reach $10.08 billion, a 25.5% increase year-on-year.

Analysts expect Tesla's Q2 revenue to be $24.3 billion, a 2.4% decrease year-on-year, with adjusted earnings per share of 61 cents, a 33% decrease year-on-year. Tesla's Q2 gross margin may fall short of expectations, with investors focusing on the latest news on FSD, Robotaxi, and energy storage.

Fed's Favorite Inflation Indicator Joins Second-Quarter GDP, Does the Fed Have More Room to Cut Interest Rates?

Wall Street expects that the core PCE price index for June, which will be released on Friday, July 26th, will increase by 0.1% month-on-month (unchanged from the previous value), bringing the three-month annualized core inflation rate to its lowest level this year, and below the Fed's 2% target.

On the previous day, Thursday, July 25th, the U.S. Bureau of Economic Analysis will release the preliminary estimate of the second-quarter GDP. Wall Street expects the actual GDP for the second quarter to have an annualized quarter-on-quarter growth rate of 1.8%, a significant increase from the previous value of 1.4%.

As inflation steadily declines and concerns about economic recession may ease, it provides more room for the Fed to start a rate-cutting cycle. The market expects that a 25 basis point rate cut in September is already a "done deal."

Analysts like Anna Wong stated:

The June PCE inflation data may bring encouraging news to the Fed. The core PCE inflation rate (the Fed's preferred price gauge) may show a third consecutive month of matching the 2% target. With the labor market cooling, slowing personal income growth, and consumers becoming more cautious in their spending habits, we believe that a rate cut in September is a certainty.

Will the Bank of Canada Cut Interest Rates Again?

Due to preempting the European Central Bank and the Fed previously, the Bank of Canada's interest rate decision in July once again attracted market attention.

It is widely expected on Wall Street that the Bank of Canada will keep the policy rate unchanged at 4.75%.

The inflation report for June showed that the overall inflation rate slowed to 2.7% compared to the same period last year, but the acceleration in the three-month moving average of core price pressures may make some policymakers hesitant.

Bank of Canada Governor Macklem stated last month that if inflation continues to ease and confidence in sustainable progress towards the 2% target strengthens, further rate cuts are expected to be reasonable.

The Once-in-Four-Years Olympic Games is Here!

The 2024 Paris Olympics, the 33rd edition of the Summer Olympic Games, will be hosted by Paris, France. The opening ceremony of this Olympics is scheduled for July 26, 2024, and it will conclude on August 11, 2024.

Some institutions estimate that the hosting cost of the 2024 Paris Olympics will be around $8.2 billion, making it the sixth most expensive Olympics in history (including both Winter and Summer Olympics).

A total of 22 gold medals are expected to be awarded on July 27th and July 28th next week.

Other Important Data, Meetings, and Events

State Council Information Office Holds Series of Press Conferences on "Promoting High-Quality Development"

On Monday, July 22, the State Council Information Office held a series of press conferences on "Promoting High-Quality Development." Liu Liehong, Director of the National Bureau of Statistics, attended the conference to introduce the situation and answer questions from reporters.

On Wednesday, July 24, the State Council Information Office held another press conference on "Promoting High-Quality Development." Han Jun, Secretary of the Party Group of the Ministry of Agriculture and Rural Affairs, attended the conference to introduce the situation and answer questions from reporters.

On Friday, July 26, the State Council Information Office held a press conference on "Promoting High-Quality Development." Wang Hongzhi, Deputy Director of the State-owned Assets Supervision and Administration Commission of the State Council, attended the conference to introduce the situation and answer questions from reporters.

Expansion of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect ETF Qualification to Take Effect on July 22

The Hong Kong Stock Exchange and the Shanghai and Shenzhen Stock Exchanges have announced the latest lists of ETFs eligible for the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect according to the new inclusion criteria. The expansion will take effect from July 22. A total of 6 ETFs will be included in the southbound Hong Kong Stock Connect. After the expansion, there will be a total of 16 ETFs in the southbound Hong Kong Stock Connect from 7 ETF issuers. 85 ETFs will be included in the northbound Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. After the expansion, there will be a total of 225 ETFs in the northbound Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect from 29 ETF issuers.

Margin Financing Ratios to be Increased

On July 10, the China Securities Regulatory Commission announced that China Securities Finance Corporation has been approved to suspend securities lending and borrowing business, effective from July 11, 2024. Starting from July 22 this year, securities exchanges are approved to increase the margin financing ratio from no less than 80% to 100%, and the margin financing ratio for private securities investment funds participating in securities lending is increased from no less than 100% to 120%.

Lawson to Delist from Tokyo Stock Exchange on July 24

Japanese convenience store giant Lawson announced that it will officially delist from the Tokyo Stock Exchange on July 24, ending its 24-year listing history.

Lawson was established in the United States in 1939 as "Mr. Lawson's Milk Store." It entered the Japanese market in 1975 and expanded its business as a professional chain convenience store company in Japan. As of the end of April 2024, Lawson has approximately 21,000 stores worldwide, with around 6,300 stores in China.

Fourth Tranche of Ultra-long-term Special National Bonds Tender

On July 24, the Ministry of Finance will issue the fourth tranche of ultra-long-term special national bonds for 2024. This tranche of national bonds is a 30-year fixed-rate coupon bond, with a total competitive tender amount of 55 billion yuan.

The coupon rate of this tranche of national bonds will be determined through competitive bidding, with interest starting to accrue from July 25 and interest payments made every six months.

Possible Decrease in Oil Prices

According to the "ten working days" principle, the next round of retail price adjustments for refined oil products will take place at 24:00 on July 25According to institutional calculations, as of the 6th working day on July 19th, the average price of reference crude oil varieties was $83.53 per barrel, with a change rate of -1.15%. The corresponding domestic retail price of gasoline and diesel should be reduced by 50 yuan per ton.

2024 ChinaJoy will be held, adding a Short Drama Innovation Forum

The 21st ChinaJoy in 2024 will be held from July 26th to July 29th at the Shanghai New International Expo Center. The ChinaJoy Short Drama Innovation Forum will bring together nearly 120 industry leaders and authoritative figures in the fields of short dramas, games, video platforms, technology, covering diverse topics such as content refinement, technological innovation, AI integration, overseas expansion, and the integration of film and games.

Next week, four new theme indices will be launched on the Sci-Tech Innovation Board

The Shanghai Stock Exchange and China Securities Index Co., Ltd. recently announced that on July 25th, the Shanghai Sci-Tech Innovation Board Medical Index and the Shanghai Sci-Tech Innovation Board Artificial Intelligence Index will be officially released. On July 26th, the Shanghai Sci-Tech Innovation Board Chip Design Theme Index and the Shanghai Sci-Tech Innovation Board Semiconductor Material Equipment Theme Index will be officially released, providing the market with a richer array of investment targets on the Sci-Tech Innovation Board.

The 5th World Photonics Conference in 2024

The 5th World Photonics Conference in 2024 is scheduled to be held from July 23rd to 26th at the Beijing National Convention Center. The conference will feature 18 thematic sessions, including laser technology and applications, infrared technology and applications, optoelectronic detection and imaging technology and applications, spectral technology and applications, terahertz technology and applications, among others.

IPO Opportunities

During the week of July 22nd to July 26th, there are 3 new A-share IPOs, namely Lijurenergy, Boshijie, and Longtuguangzhao; there are no new listings on the Hong Kong stock market; and 3 stocks will be listed on the U.S. stock market.

A total of 16 new funds (combined statistics for A-class and C-class) will be issued during the week.