China's most popular heavy blow to inflation, upwa

2022-08-19
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China's heavy blow to inflation, upward pressure on crude oil

in early November, the Federal Reserve announced the details of the second quantitative easing policy, and the market bull sentiment rose again, with crude oil approaching the $90 mark. After the "red three soldiers" at the bottom of the US dollar, it gradually strengthened and climbed above the US $78 mark again, leading to the decline of crude oil prices denominated in US dollars. Looking forward to the future, we believe that China will continue to strengthen the management of inflation expectations in the short term. The European debt crisis is pending, the US dollar is accelerating, and the future market of crude oil may remain weak, which does not rule out the possibility of continuing to find a bottom

China has dealt a heavy blow to inflation. Crude oil is under upward pressure.

the US dollar index fell below 79, distorting the fundamental value of crude oil to a great extent. The logic of the market pushing up crude oil is that quantitative easing policy may further weaken the US dollar, and the weakness of the US dollar will make the RMB linked to the US dollar have strong appreciation expectations. Under these two forces, crude oil has accelerated

the market linked quantitative easing to a weak dollar, and the dollar fell below the edge of the rising channel to below 76 for the first time, which directly led to a surge in dollar denominated crude oil. There are many differences within the Federal Reserve over the trend of the dollar. If the United States wants to continue to attract capital inflows, it must rely on a strong dollar, not a weak dollar. A weak dollar has little benefit for solving the structural problems of the United States. This policy is harmful to others but not necessarily beneficial to itself. Therefore, when the dust of the second quantitative easing settled, the dollar began a bottoming rebound, rising to a high above 78, and crude oil fell significantly

cotton rose to a 140 year high, China's CPI rose to a high of 4.44% in November, a large amount of hot money flowed into Hong Kong, pushing up asset prices, and the foam continued to expand. In order to reduce and solve the pollution caused by waste water and exhaust gas, China's central bank, on the one hand, used price means to raise the reserve ratio and interest rates to surround the inflow of hot money. On October 19, China announced an interest rate increase of 25 basis points. In the following November, the people's Bank of China raised the statutory deposit reserve ratio twice in nine days, bringing it to a record high of 18%. On the other hand, the government has introduced a series of administrative measures to suppress asset prices, including housing and commodities. The State Council issued 16 measures to stabilize prices, including vigorously developing agricultural production and stabilizing the supply of agricultural and sideline products, and then issued the notice of the State Council on stabilizing the general level of consumer prices and ensuring the basic livelihood of the people. The last time temporary price intervention was implemented was in January 2008. In terms of short-term goals, the central bank has obviously changed its monetary policy goal from maintaining economic growth to controlling inflation and asset foam. In the face of the influx of hot money, other Asian countries such as South Korea and Vietnam have also raised reserve ratios. On November 16, South Korea decided to raise the benchmark interest rate by 25 basis points (to 2.5%), the second interest rate hike in the year after the 25 basis points hike in July (the second rate hike is expected to be in December this year); At the beginning of this month (November 5), the Central Bank of Vietnam also unexpectedly raised interest rates by 100 basis points (to 9%), raising the benchmark interest rate for the first time since December 2009. Asia is still in the era of negative interest rates, and inflation expectations are still high in the case of excess peripheral liquidity. The Central Bank of China has made two moves in the short term, and the deposit reserve has reached a record high, indicating the resolute regulation attitude of the central bank. We believe that the next measures taken by emerging markets to resist inflation and asset foam will continue, and the expectation of interest rate hike still exists. In extraordinary times, we use extraordinary means, and we do not rule out the possibility of China raising interest rates again this year. In view of the above analysis, China's economic growth will slow down at a certain stage, and funds will slowly flow out of emerging markets. For crude oil, the upward pressure is not small

the Irish crisis led to the decline in the price of risky assets

another reason for the rebound of the US dollar is that heavy metal pollution in some regions continues to be caused by the Irish crisis. At the end of last week, the Irish government compromised and expressed its willingness to accept the rescue, and the problem of bank rescue was finally settled. However, EU and IMF officials said that the progress of the release of these rescue funds would depend on the outcome of the negotiations between the Irish government to take measures to restructure debt and reduce the budget deficit, and the details of the rescue plan have not yet been finalized. Especially with regard to the corporate income tax of Ireland, which is widely criticized by other Member States, there is still great uncertainty about the causal factors that affect the mechanical measurement of the pressure testing machine. Therefore, the short-term sharp recovery of the exchange rate of the euro against the US dollar is not strong. The bargaining between Europe and the United States on political chips is still continuing. Geithner's forefoot announced that the Irish problem will become the phased end of the European debt crisis, and the U.S. rating agencies once again exposed the problems of Spain and Portugal. U.S. Treasury bond yields are under upward pressure, and the withdrawal attitude of the European Central Bank has eased due to market fluctuations in peripheral countries such as Ireland, so the interest rate gap between the two will rise in the short term due to expectations. Driven by fundamentals and safe haven funds, the dollar rebound may continue until the end of the month, and the space may be nearby, which will put pressure on crude oil and other commodities

the slow improvement of fundamentals provides support for crude oil prices

in addition to the impact of liquidity, the fundamentals of crude oil are in the process of slow improvement. According to the inventory data released by the United States, the commercial inventory of crude oil has decreased by 10million barrels in the past month, and the distillate oil inventory is 95% of the same period last year. At the end of October, China's diesel inventory fell by 10.7% month on month, and the inventory of the overall refined oil depot fell by 5.2% month on month, which was the fifth consecutive month of decline and reached a new low in the year. PetroChina had previously purchased 200000 tons of imported diesel oil, of which the first 35000 tons officially arrived on November 19. China became a net importer of diesel oil for the first time in November. From the position structure of crude oil, commercial hedgers are generally short, which means that few producers are short and consumers are long. The economic data recently released by the United States also shows that the overall situation is good, which will support future crude oil demand. With the arrival of the winter heating oil consumption peak season in the United States, the consumption of distillate oil in fundamentals will provide support for crude oil

to sum up, the possibility of the Chinese government contracting liquidity management inflation still exists, the European debt crisis continues, and it is possible for crude oil to continue to seek the bottom of $80 in the short term. However, in the case of slow improvement in fundamentals, generally speaking, when the gap between trapezoidal screws is relatively large, there is strong support around $78

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