Iron ore and A-share market weekly report and global capital market weekly report.

• The pig iron production remains high, steel mill profits are recovering, and there is a small accumulation in the steel mill after the Dragon Boat Festival. Short-term ore prices are trending strong.

• At the macro level, the manufacturing PMI in June was 49%, still in a contraction state, and real estate demand remains weak.

• The global iron ore delivery totalled 32.31 million tons, a decrease of 0.63 million tons from the previous period. Australia and Brazil's iron ore shipments at Port 19 totalled 26.78 million tons, a decrease of 1.84 million tons from the previous period.

• The basic maintenance in Australia has been completed this week, and subsequent shipments will remain stable.

- 247 steel mills had a blast furnace operating rate of 84.09%, which was basically the same as the previous week; a year-on-year increase of 3.30%; blast furnace iron production capacity utilization rate of 91.98%, an increase of 0.38% compared to the previous week, and a year-on-year increase of 4.38%.

- The daily average iron production was 2.468 million tons, reaching a new high for the year.

- The iron ore inventory at 45 ports nationwide was 12742.00, a week-on-week decrease of 50.98%; the daily average amount of iron ore clearance was 3.0831 million tons, an increase of 0.0449 million tons.

- It is expected that the incoming volume will continue to increase.

A-share market weekly report and global capital market weekly report

This week's A-share weekly report:

1. The overall trading activity in the market has clearly declined, with relatively high trading activity in sectors such as media, communications, and machinery.

2. The net income forecast for the entire A-share market in 2023 and 2024 has been further lowered.

3. The margin financing and securities lending activity has significantly declined to a new low for the year, while the positions of active equity mutual funds continue to rise. Proxy variables indicate that mutual fund investors are net buyers once again.

5. On one hand, although northbound allocation funds have started to sell slightly, when considering the number of industries with net buying, it is more likely that allocation funds are undergoing structural adjustments. On the other hand, trading forces (margin financing and northbound trading) have shown clear signs of withdrawal, indicating that trading forces may still be one of the main sources of market volatility.

As global inflation continues to decline, the proportion of countries experiencing significant positive changes in overall inflation continues to decrease, leaving room for more negative news. In June, the overall inflation rate in the eurozone slowed to 5.5% year-on-year, below market expectations, and the inflation rate in Spain is below 2% (the Swiss inflation rate is also below 2%). The year-on-year inflation rate for core personal consumption expenditure in the United States is 4.6%, also below market expectations.

As inflation becomes less of a concern, compared to market expectations for growth, inflation expectations have weakened their impact on cross-asset prices. Bond sell-offs occurred in various regions in June, but mainly due to the diminishing concerns of investors about a recession (our market-implied recession probability has dropped to 45%) and the smaller increase in market inflation, as expectations of policy rate cuts reduced. Front-end rates are rising, except for the United Kingdom.

Market inflation and expectations of stock market growth have decoupled, resulting in a decrease in the correlation between inflation swap and cyclical/defensive stocks last month. Although the difference between the two has gradually widened this year, such a divergence is not uncommon in the case of high inflation and is consistent with the market pricing of a 'soft landing' scenario.

The correlation between stocks and bonds has recently become more positive, reminding people not to prematurely overlook the risk of rising interest rates putting pressure on the stock market. In other words, relatively benign inflation should lead to an increase in the negative correlation between stocks and bonds. In fact, when the policy shocks generated by inflation are smaller than growth shocks, the correlation between stocks and bonds tends to be higher, as reflected in the ratio of the volatility of our PC2 'monetary policy' and PC1 'global growth' factors.

We have retained University of Wisconsin bonds in asset allocation, partly because the steep yield curve inversion makes cash more attractive, and the market has already priced in relatively rapid normalization of inflation, with little inflation risk premium. In fact, although our economists expect US inflation to fall again due to significant progress in labor market rebalancing, lowering the year-on-year core PCE inflation forecast for December 2023 to 3.5%, the market expects the inflation path in the coming months to be lower. Starting from here, buying inflation swaps looks very attractive, not only because one-year inflation should be higher than current pricing, and inflation risk premiums should increase, but also as a hedge tool against sharper hawkish repricing triggered by higher-than-expected inflation and eventually pressuring the stock market. And to balance bonds in the investment portfolio.