August 13 Market Analysis

The US producer price index (PPI) for July showed that inflation was lower than expected, boosting market expectations that interest rates would be cut soon, causing the probability that the Fed would cut interest rates by 50 basis points in September once again exceeded 50%. This news propelled US stocks higher throughout the day and caused major stock indexes to collectively close near intraday highs. The Nasdaq index rose more than 2%, the Dow Jones Industrial Average rose more than 400 points, or 1%, and the S&P 500 and Russell 2000 small-cap indices rose more than 1.6%. The Market Panic Index VIX fell more than 12%, almost erasing all of this month's gains.

The chip stock index showed outstanding performance, rising more than 4% to a two-week high, while the China Securities Index rebounded slightly after an initial decline of 0.8%. Nvidia's increase reached 6.5%, and Starbucks recorded the biggest one-day increase in history after an unexpected change of CEO, up more than 24%.

Furthermore, optimism among small businesses in the US rose to its highest point since February 2022. Although pessimism about the future business environment still exists, the economy is expected to reduce the proportion of companies that have deteriorated to its lowest level since November 2020, indicating a certain recovery in confidence.

In the money market, the yen turned upward in the intraday period and returned above 147, while 10-year US bond yields declined for three consecutive days. These all indicate that there is some safe-haven demand in the market. The US dollar is at a one-week low. The pound rose sharply by more than 100 points in the intraday period, and the offshore RMB exchange rate against the US dollar rose by more than 310 points, breaking through 7.15 yuan. The price of Bitcoin rose by nearly 3%, once again reaching the $0.06 million mark.

The crude oil market, on the other hand, fell 2% due to concerns about a slowdown in global demand. U.S. crude oil ended a five-day continuous rise and fell below a three-week high. The price of gold declined slightly in the profit settlement before the CPI inflation data was released.

In the Asian market, A-shares rose overall, but the trading volume was less than 500 billion yuan for two consecutive days, and spot and futures of treasury bonds rebounded. The People's Bank of China made a large net investment in reverse repurchases to boost market liquidity. The Japanese stock market surged 3.45%, recovering from the decline since August 5, while the yen fell relatively lower.

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