Weekly Hot List Highlights: How will the gold market perform after a high-level pullback? The sell-off of US bonds did not drag down the stock market!

Market Review

The US dollar index rose overall this week, as the market expected the Federal Reserve to slow down its rate cuts, while investors adjusted their positions ahead of the tight US election. The US dollar index surged above the 104 level, hitting a two-and-a-half-month high. So far this month, the US dollar index has risen by over 3%, and is expected to close higher for the fourth consecutive week.

Spot gold fluctuated this week, initially rising to $2,758 per ounce due to uncertainties surrounding the US election and factors such as the Middle East conflict stimulating investors' safe-haven demand, hitting a record high, before dropping by $50 and briefly falling below the $2,710 level before rebounding. Gold prices have already risen by over 30% this year.

On the non-dollar currency front, after several European central bank officials made dovish speeches, currency traders increased their bets on rate cuts, causing the Euro to fall below $1.08 for the first time since early August, marking the fifth consecutive week of decline. Goldman Sachs stated that in the context of Trump's tariffs and domestic tax cuts in the US, the Euro could fall by as much as 10%.

Furthermore, market uncertainty looms over the US-Japan election, with the US dollar against the Japanese Yen breaking above 153 for the first time since the end of July this week, and is expected to close higher for the fourth consecutive week. Forex strategists for the Yen predict that there is a risk of the Yen/US dollar falling to the 160 level in the coming weeks.

International oil prices rose slightly this week, as traders shifted their focus from hopes of a ceasefire in the Middle East to global supply-demand balance. Goldman Sachs predicts that by 2025, Brent crude oil will average $76 per barrel. Negotiators from the US and Israel will meet again in the coming days to resume ceasefire talks, but Israel's intensified attacks on multiple fronts and the uncertainty surrounding its response to Iran's attacks have left the oil market in a state of anxiety.

In the stock market, NVIDIA's stock price hit a historical high this week, surpassing a market value of $3.5 trillion; Tesla rose by 22% on Thursday, achieving its best single-day performance in over 11 years, not only erasing all losses since 2024, but also adding approximately $150 billion to its market value. Cross-border ETFs such as US stocks and the Nikkei faced significant redemptions, with the highest proportion of fund shares decreasing by nearly 40%. In the A-share market, the CSI 50 Index, which doubled in 15 days, experienced a major shock.

Morgan Stanley advised investors to maintain a neutral position on US bonds before the November 5th election, stating that the market is unlikely to see the kind of drastic sell-off seen after the Republicans won both houses in 2016. Goldman Sachs strategists mentioned that the era of a decade-long rally in the S&P 500 index is ending, and in the next 10 years, it will face competition from assets like US bonds, with an annualized nominal total return rate only slightly higher than 3% However, Morgan Stanley's view is completely different, expecting an annualized return of 6.7% for large-cap stocks in the next 10-15 years.

Weekly Highlights

1. Fed Expected to Slow Down Rate Cuts, U.S. Bond Yields Soar

This week, several senior Fed officials made speeches on the outlook for monetary policy, supporting a cautious, gradual, and slow rate cut approach. They believe that in a highly uncertain economic situation, caution should be exercised, with interest rates expected to be "significantly higher" than the levels of the pre-pandemic decade. The latest Beige Book from the Fed shows that economic activity in most parts of the U.S. has seen little growth since early September, with several districts reporting a slowdown in wage growth.

FOMC voter for 2025 and Kansas Fed President Schmidt expressed a preference for a relatively aggressive balance sheet reduction strategy, calling for a gradual and cautious rate cut strategy due to the uncertainty in the economic environment; Minneapolis Fed President Kashkari stated that the neutral interest rate may be higher than before, and if the labor market weakens, it may be necessary to accelerate rate cuts; Dallas Fed President Logan believes that money market rates should be close to or slightly higher than the excess reserve rate. Cleveland Fed President Hamrick mentioned that progress on lowering inflation is good, but it still remains above the target level.

According to CME's "FedWatch," the probability of a 25 basis point rate cut by the Fed in November is 96.3%.

With dovish statements from the Fed, strong U.S. economic data, and increased concerns about budget deficits in the upcoming U.S. elections, U.S. bonds have experienced a decline similar to the Greenspan era of 1995 since the Fed's rate cut in September, with the 10-year Treasury yield returning above 4.2% this week.

As a result, mortgage rates have surged, leading to a decrease in U.S. home purchase and refinance applications to the lowest since August last week, and existing home sales in September fell to nearly a 14-year low. Amid doubts about the Fed's rate cut pace, the size of U.S. money market fund assets has also risen to $6.51 trillion, reaching a record high.

Demand for the Fed's overnight reverse repurchase agreements is close to falling below $200 billion, nearing the lowest level in three and a half years. Wall Street predicts that once the usage of reverse repurchase agreements approaches zero, the central bank will have to stop quantitative tightening.

2. Kuroda Implies No Rate Hike Next Week

The Bank of Japan will make its latest policy decision on October 31, with investors watching for clues on the timing of another rate hike. BOJ Governor Kuroda stated this week that there is enough time to carefully examine the risks facing the economy when deciding when to raise rates again. He mentioned that the market is still unstable, and implied that the central bank is not relaxing its vigilance against the return of volatility.

From the data perspective, Japan's PMI preliminary reading shows economic weakness at the beginning of the fourth quarter, with confidence in the outlook for the next 12 months weakening to the lowest level since August 2020.

Regarding the yen, Kuroda stated: "Part of the recent decline in the yen is due to optimism about the U.S. economy." Japanese Finance Minister Kato warned that he will "closely monitor the foreign exchange market with a stronger sense of urgency, including monitoring speculative trading." **

In addition, the Bank of Japan stated in its latest "Financial System Report" that the activity level of the Japanese stock market has been consistently higher than historical trend levels this year, but valuations have not shown signs of overheating, with the price-earnings ratio remaining at historical average levels.

3. Central Bank Conducts First Ever Swap Facility Operation!

The People's Bank of China conducted the first swap facility operation involving securities, funds, and insurance companies, with an amount of 50 billion RMB, using a rate bidding method. 20 institutions participated in the bidding, with the highest bid rate at 50 basis points, the lowest bid rate at 10 basis points, and the winning bid rate at 20 basis points.

Several securities firms have completed the first market-wide pledged repo transaction, the first national bond swap transaction, and the first batch of national bond pledged repo transactions this week. CICC secured the first pledged repo transaction on Monday; on Tuesday and Wednesday, Guotai Junan successively completed the first national bond swap transaction and the first batch of national bond pledged repo transactions in the entire market. In addition, CITIC Securities has completed the first batch of swap facility operations simultaneously on the Shanghai and Shenzhen stock exchanges, while Caitong Securities has completed the necessary procedures for the first transaction-related pledge operations.

Several securities firms have indicated that they will actively utilize the swap facility to borrow funds to increase their stock holdings. It is reported that leading public fund institutions such as E Fund Management, Huaxia Fund Management, and China Asset Management are also actively participating in the initial swap facility operations.

4. IMF Warns of High Uncertainty from US Election

The International Monetary Fund (IMF) released its latest World Economic Outlook report, maintaining the global economic growth forecast for 2024 at 3.2%. It is expected that advanced economies will grow by 1.8% this year, while emerging markets and developing economies will grow by 4.2%. At the same time, the institution warned that the US election brings high uncertainty to fragile financial markets and that the global economy faces the risk of falling into a low-growth, high-debt path. Policymakers should take action to address debt issues and implement reforms to promote growth.

5. European Central Bank Discusses Cutting Rates Below Neutral Levels

The currency market increased bets on a rate cut by the European Central Bank this week, with the probability of a 50 basis point rate cut in December reaching 40% at one point. Sources said that the European Central Bank is discussing whether rates need to be cut below neutral levels.

Amid escalating risks to the economic outlook, more dovish ECB officials like Vice President de Guindos advocate for a larger rate cut, suggesting the possibility of a significant rate cut in December; while others like Austrian Central Bank Governor Holzmann and Dutch Central Bank Governor Knot argue that current economic data does not justify a larger rate cut, with the German Central Bank President even warning against hasty rate cuts and emphasizing the need for policy flexibility.

ECB President Lagarde believes that the direction of rate cuts is clear, but the pace of rate cuts is yet to be decided, with the possibility of taking more significant actions not ruled out. She also pointed out that the central bank has made very good progress in combating inflation. Chief Economist Lane expressed similar views, while also emphasizing the absence of sharp signs of economic weakness.

6. Bank of Canada cuts interest rates for the fourth consecutive time

The Bank of Canada cut interest rates by 50 basis points to 3.75% this week, stating that as inflation has dropped to around 2%, it has decided to lower interest rates to support economic growth, and mentioned that if economic developments are broadly in line with expectations, it will further reduce interest rates. This is the fourth consecutive rate cut by the bank. The Governor of the Bank of Canada stated that the current focus is on maintaining low and stable inflation, ensuring a smooth economic landing.

7. Tesla's stock price erases annual decline

Tesla's latest quarterly profit exceeded expectations, with car deliveries expected to "slightly increase" this year. The stock price surged by 22% in a single day, ranking second in its history, driving this year's stock price turnaround and increasing Elon Musk's wealth by $33.5 billion overnight.

The financial report shows that Tesla's net profit for the third quarter was $21.67 billion, exceeding the expected $17.8 billion, with a gross margin of 19.8%, higher than the expected 17.3%. Revenue increased by 8% to $25.2 billion, slightly below the average expectation of $25.4 billion. In addition, the selling cost per vehicle for Tesla dropped to a historic low of about $35,100, with Cybertruck achieving profitability for the first time in a quarter. Tesla still expects the production of affordable models to begin in the first half of 2025.

This wealth increase for Musk is his third largest historically, bringing his wealth to $270.3 billion, surpassing the second-ranked Amazon founder Bezos by $61 billion. It is worth noting that this billionaire received a warning letter from the U.S. Department of Justice for stating that he would give $1 million to American voters daily.

8. China Banking and Insurance Regulatory Commission: Further expand the pilot business of commercial pension funds

The General Office of the China Banking and Insurance Regulatory Commission issued a notice on matters related to vigorously developing commercial insurance pension funds. The notice mentioned further expanding the pilot business of commercial pension funds. Following the principle of "mature one, operate one," more eligible pension insurance companies are supported to participate in commercial pension fund business. Based on the summary of pilot experience, the pilot period will be extended, and the pilot area will be expanded. Pension insurance companies should focus on customer retirement needs, enrich product supply, improve business processes, enhance customer consumption experience, strengthen risk management, and improve regulatory rules related to commercial pension fund business.

9. Guangzhou mortgage loan interest rates for commercial loans must not be lower than provident fund loan rates

On Thursday, some borrowers in Guangzhou received notifications from banks stating that commercial loan interest rates cannot be lower than provident fund loan rates. Reporters have verified this information. Currently, the interest rates for first-time personal housing provident fund loans for 5 years and below (including 5 years) and over 5 years are 2.35% and 2.85%, respectively.

After the latest LPR adjustment, commercial banks in Guangzhou and Foshan have successively introduced the latest housing loan interest rate pricing policies, with many bank institutions offering first-home loan rates below 3%. Earlier reports indicated that foreign banks had a significant competitive advantage in mortgage loan rates, with the lowest first-home loan rate previously reaching 2.6%.

10. Blinken's 11th trip to the Middle East, ceasefire negotiations to resume next week

As U.S. Secretary of State Blinken arrives in the Middle East for the 11th time, Israel and Hezbollah continue to engage in ongoing conflict. The Chief of Staff of the Israeli Defense Forces stated that Israel may soon end its conflict with Hezbollah as it has fundamentally destroyed Hezbollah's senior command system in Lebanon.

Blinken stated that the U.S. completely rejects any Israeli actions to reoccupy Gaza, emphasizing that when Israel responds to Iran's attack on October 1, it must do so in a manner that does not lead to further escalation, which is crucial. The Iranian Foreign Minister mentioned closely monitoring U.S. bases in the Middle East.

Furthermore, the U.S. and Israel announced that representatives for Gaza ceasefire negotiations will meet next week. A senior Hamas official mentioned that a Hamas delegation traveled to Cairo to hear proposals for a ceasefire agreement, but the organization's stance remains unchanged. The Governor of the Bank of Israel predicted that the country's operations on multiple fronts will continue into the first quarter of next year.

11. "BlackRock's 'buying spree' of Pinduoduo" turns out to be a mistake

On Tuesday, Pinduoduo's stock price surged intraday before falling back. In terms of news, documents disclosed by BlackRock on Monday showed that its holdings in Pinduoduo increased significantly from 29 million shares in the second quarter to over 132 million shares, equivalent to 9.5% of Pinduoduo's total share capital. BlackRock later issued an announcement around Tuesday evening, dividing its Pinduoduo holdings by 4 to approximately 33 million shares, changing its share capital ratio to 2.4%, as each Pinduoduo ADS is equivalent to 4 Class A ordinary shares.

12. Moutai's Hong Kong distributor "rushes ahead," lowers Feitian price by nearly HKD 1,000

A Moutai distributor in North Point, Hong Kong, recently significantly reduced prices for sale. The price of 500ml Feitian Moutai for 2022 and 2023 dropped from HKD 3,280 to HKD 2,380, approximately RMB 2,166, which is close to or lower than the retail price in mainland China. In addition to Feitian Moutai, other series such as Four Seasons, Sanhua Feitian, and the Year of the Dragon have also been reduced by around HKD 1,200