© Reuters. Guosheng Securities: The Fed will remain on the sidelines
Zhitong Finance APP learned that Guosheng Securities released a research report saying that the U.S. economy continues to slow down, but employment resilience remains strong, and the Federal Reserve will remain on the sidelines. Whether to cut interest rates in March depends on data performance. Short-term focus: 1/11 U.S. CPI in December, 1/23 Bank of Japan interest rate meeting, 1/25 U.S. preliminary fourth quarter GDP & European Central Bank interest rate meeting, 2/1 Federal Reserve & Bank of England interest rate meeting, 1/ 19 & 2/2 US temporary appropriations bill phased expiration dates.
The following is a summary of the Guosheng Securities research report:
event:
On January 3, the United States announced the ISM manufacturing PMI in December; on January 5, the United States announced non-farm employment and ISM non-manufacturing PMI in December.
Core conclusions:
The U.S. economy continues to slow down, but employment remains resilient. The Federal Reserve will remain on the sidelines and whether to cut interest rates in March depends on data performance.
1. The United States added 216,000 non-farm jobs in December, which was higher than the expected value of 170,000. However, the data for the first two months were revised downward by 71,000. The unemployment rate remained unchanged at 3.7%, slightly better than the expected value of 3.8%. It should be noted that the number of new jobs surveyed by households dropped significantly by 683,000, the largest decline since May 2020, which is a serious deviation from the number of new non-agricultural jobs surveyed by companies.
2. The U.S. ISM manufacturing PMI in December was 47.4%, slightly higher than the expected value of 47.1% and the previous value of 46.7%; the non-manufacturing PMI was 50.6%, significantly lower than the expected value of 52.6% and the previous value of 52.7%. Both the manufacturing and non-manufacturing PMI new orders index and price index fell, indicating that the economy is still slowing down and inflationary pressure has further eased.
3. After the release of non-farm payrolls, the probability of an interest rate cut by the Federal Reserve in March, as implied by interest rate futures, dropped from about 70% to about 50%. Then, after the release of the ISM non-manufacturing PMI, the probability of a March interest rate cut rose again to over 70%. The market currently expects the Federal Reserve to cut interest rates by at least 125bp throughout 2024, with a half probability of cutting interest rates by 150bp. This expectation has been slightly lowered since the end of December.
4. At present, the U.S. economy is still slowing down, but is expected to achieve a soft landing. The labor market is still tight and is difficult to weaken quickly. Inflation is still high and the pace of subsequent decline is slow. Against this background, the Federal Reserve still prefers to remain on the sidelines. Whether to cut interest rates in March depends on the performance of data from January to February, and there is still a lot of suspense.
5. Short-term focus: 1/11 US CPI in December, 1/23 Bank of Japan interest rate meeting, 1/25 US preliminary fourth quarter GDP & European Central Bank interest rate meeting, 2/1 Federal Reserve & Bank of England interest rate meeting, 1/19 & 2/2 US temporary appropriations bill phased expiration dates.
2024-01-06 07:12:00
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