Today's Market Focus: Surge in U.S. Inflation Expectations for October

Market Review

Highlights

China Market

1. China's CPI Shows No Month-on-Month Growth in September

In September, China's CPI (Consumer Price Index) shifted from a 0.1% increase the previous month to no change, continuing to rise month-over-month while the PPI (Producer Price Index) saw an expanded increase month-over-month and a narrowed year-over-year decline. Specifically, the national CPI remained unchanged year-over-year at 0%, a decrease from the 0.1% rise in August; it rose by 0.2% month-over-month, a 0.1 percentage point decrease from the previous month. The national PPI year-over-year dropped by 2.5%, a reduced decline from August's 3%; month-over-month, it rose by 0.4%, with the increase expanding by 0.2 percentage points from the previous month. (See image below)

2. The Securities Regulatory Commission Announces Increased Margin Ratio for Short Selling

To strengthen the counter-cyclical adjustment of short selling operations further, the Securities Regulatory Commission, after comprehensive demonstration and evaluation and based on the current market situation, made targeted adjustments and optimizations to the system for short selling and strategic investors' loan of allotment shares. For the short selling side, the margin ratio will be raised from not less than 50% to 80%, and for private equity securities investment funds participating in short selling, the margin ratio will be increased to 100% to play a counter-cyclical regulatory role. On the lending side, the special asset management plans established by listed company executives and core employees through participating in strategic allotment for loans will be canceled, and certain restrictions will be applied to other strategic investors' lending methods and proportions in the early stages of listing.

3. Shanghai and Shenzhen Stock Exchanges State that Securities Firms Should Strengthen Investor Verification and Short Selling Management

The Shanghai and Shenzhen stock exchanges issued a notice on optimizing short selling transactions and collateralized securities lending transactions. It indicates that securities firms should verify investor information according to the principle of full transparency and strengthen the management of investors' short selling actions. Firms should conduct front-end checks on investors' transaction behaviors, strictly prohibit involvement in or facilitation of violations, and should not process short selling or collateralized securities lending transactions for investors who do not comply with relevant regulations.

4. Guizhou Province Plans to Issue Its Largest Refinancing Bond to Date

The Finance Department of Guizhou Province announced that, within the total amount approved by the State Council, it plans to issue the 2023 Guizhou Provincial Government General Refinancing Bonds (seventh to twelfth issues) with a total value of 88.23804 billion yuan. These bonds are fixed-rate, interest-bearing book-entry bonds, all designated for refinancing, with maturities of 3, 5, 7, and 10 years, aimed at repaying existing debts. The bidding will be held on the morning of October 20.

5. Number of Marriage Registrations Declined by 10.6% Last Year

The Ministry of Civil Affairs released the "2022 Civil Affairs Development Statistical Bulletin" on October 13, showing that in 2022, there were a total of 4,310 marriage registration institutions and sites nationwide, of which 1,103 were marriage registration institutions. They legally processed marriage registrations for 6.835 million couples throughout the year, a decrease of 10.6% from the previous year. The marriage rate was 4.8‰, a drop of 0.6‰ from the previous year. Data indicates that since reaching a peak of 13.469 million couples in 2013, the number of marriages has declined for nine consecutive years.

Overseas Market

1. Israeli Military Prepares for a Broad Ground Offensive in Gaza

The Israel Defense Forces announced that, with support from the logistics departments, it has completed the mobilization of hundreds of thousands of reservists and is ready to implement a broader ground military operation plan in Gaza to expand the offensive, including joint attacks from land, sea, and air. In response, Hamas' armed wing, the Qassam Brigades, stated it is fully prepared for any ground military operations by the Israeli military.

2. U.S. October Inflation Expectations Surge

U.S. consumer confidence, as measured by the University of Michigan, experienced an unexpected significant decline, marking the largest single-month drop since June 2022. The one-year inflation expectation increased to 3.8%, reaching a five-month high, with both the expectation and previous value at 3.2%. About 49% of consumers said that high prices are eroding their living standards, tying the record high set in July of last year.

3. Putin States Russia Needs a Stronger Ruble

Russian President Vladimir Putin, at the CIS meeting, stated that the country's GDP growth could reach 3% this year. The overall economic situation remains stable, and the economic structure is changing, with industry contributing more to economic growth. Russia has resumed capital controls on major exporters because, according to Putin, "we need a stronger ruble" to meet the government's budget needs. Furthermore, Putin denied any Russian involvement in the damage to the gas pipeline with Finland.

4. Japan's Finance Minister Issues Another Warning of Possible Intervention in Currency Market

Recently, due to the rise in U.S. Treasury yields, the Japanese yen is under pressure. This Thursday, after the U.S. published higher-than-expected CPI data, leading to a significant increase in U.S. Treasury yields on the day, the yen weakened. Japan's Finance Minister, Taro Aso, has repeatedly stated he does not wish for excessive fluctuations in the exchange rate. The Japanese government is highly concerned about exchange rate fluctuations and will take appropriate measures to respond to rapid changes, not ruling out any options against excessive volatility in the forex market. Aso also mentioned that Japan would maintain communication with foreign authorities regarding the exchange rate.

This Week's Focus

This week, investors should pay attention to the Eurozone trade balance, economic sentiment index, harmonized CPI, UK CPI, retail sales, labor market report, China's third-quarter GDP, retail and industrial production, loan prime rate, U.S. retail sales, and initial unemployment claims. In addition, investors should keep an eye on the Israel-Palestine situation, speeches by Fed officials Williams, Harker, Cook, and Logan, the minutes from the Reserve Bank of Australia's monetary policy meeting, and the Federal Reserve's Beige Book, among other risk events.