Cathay Pacific Haitong: The escalation of the US-Iran conflict disrupts oil prices and is expected to ease liquidity pressure one after another in mid-late July
The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that oil prices have rebounded after the situation in the Middle East has once again escalated, and that the Federal Reserve's position is trending upward, but internal differences are still large. If subsequent inflationary pressure recedes as scheduled and the July FOMC meeting does not release more hawkish signals, it is expected that concerns about interest rate hikes will cool down further. Liquidity pressure is expected to ease in mid-late July, moving from “black June” to “reverse July.”
Cathay Pacific Haitong's main views are as follows:
The situation in the Middle East is once again in turbulence, and the Federal Reserve's statement is trending towards eagles. After successive attacks on ships occurred in the Strait of Hormuz, the conflict between the US and Iran escalated again, and Iran closed the Strait of Hormuz once again. In the future, the US and Iran are arguing while talking, and the situation may be repeated, or it will still be the norm. The minutes of the June Federal Reserve interest rate meeting show that some officials believe there is a possibility of interest rate hikes. There are still large differences within the Federal Reserve, and hawkish views have strengthened. Walsh announced the list of task force leaders on July 9. The lineup is luxurious, and research results may be submitted at the end of this year, but short-term guidance on the direction of monetary policy is still unclear. In a situation where the Federal Reserve's statements tend to hawk, but differences are still large, and Walsh's statement is vague, the market's attention to economic data may increase. If subsequent inflationary pressure falls as scheduled and the July FOMC meeting does not release more hawkish signals, it is expected that concerns about interest rate hikes will cool down further. It is expected that mid-late July will gradually ease liquidity pressure, moving from “black June” to “reverse July.”
Global asset performance: The escalation of the US-Iran conflict boosts oil prices. The price of crude oil has rebounded due to the renewed escalation of the US-Iran conflict. IPE oil futures rose 4.6% to 75.2 US dollars/barrel, of which oil once rebounded to 80 US dollars/barrel on July 8. COMEX copper rose 1.8%, and London gold has now fluctuated and declined. The stock markets of the world's major economies had mixed ups and downs. Among them, the Hang Seng Index rebounded markedly, rising 3.5%. The S&P 500 index rose 1.2%, the Nikkei 225 index fell 1.7%, and the Shanghai Composite Index fell 1.2%. The 10-year US Treasury yield rebounded 7 BP to 4.56%, mainly driven by rising real interest rates. The US dollar index fluctuated around 101, the RMB exchange rate was relatively stable, and the US dollar was still around 161 points against the yen.
US: Economic resilience remains. The US ISM service sector PMI declined somewhat in June but is still at a relatively high level, reflecting the current resilience of the US service industry. In terms of the labor market, the number of people applying for unemployment benefits for the first time remains low. Although the number of people who continue to receive unemployment benefits has rebounded, it has basically remained stable. The risk that the US job market will stall significantly in the short term is relatively low. Next week, we can focus on the release of US CPI (July 14) and PPI (July 15) data.
Risk warning: The situation between the US and Iran is repeated, and the Federal Reserve's monetary policy exceeds expectations.