Last Friday, the United States released the December non-farm employment data, which, although the lowest since December 2020, still exceeded market expectations. The U.S. unemployment rate in December fell again, below market expectations. On the positive side, the growth rate of U.S. hourly wages has significantly decreased on a month-over-month basis, lower than market expectations, and the U.S. non-manufacturing PMI has dropped sharply, falling below the boom-or-bust line for the first time, leading to a significant rebound in all three major U.S. stock indexes.

Last night, U.S. stocks opened higher, with the Nasdaq up more than 2%, but after a series of hawkish remarks by Federal Reserve officials, U.S. stocks plummeted, with the Dow Jones Industrial Average closing down 0.34% and the Nasdaq's gains narrowing to 0.63%.

Specifically, due to the lower-than-expected wage growth rate and the first-time drop of the U.S. non-manufacturing PMI below the boom-or-bust line announced on Friday, it indicates that inflation driven by the U.S. service industry is expected to ease, and the market anticipates that the Federal Reserve will stop raising interest rates sooner and cut rates faster, leading to a surge in U.S. stocks.

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However, last night, San Francisco Federal Reserve President Mary Daly, in an interview with the media, stated that Federal Reserve policymakers unanimously believe that inflation is more persistent than expected and may need to raise interest rates above 5%, maintaining them at a high level for a period of time.

At the same time, Atlanta Federal Reserve President Raphael Bostic spoke, expressing a preference for ultimately raising interest rates to 5.00%-5.25% and then maintaining them until 2024.

In addition to the Federal Reserve's interest rate hikes, the global economic downturn leading to a decline in the performance of tech giants is gradually becoming a reason for U.S. stocks to continue to sell off. Last year, U.S. stocks devalued due to the Federal Reserve's rate hikes, and this year they may devalue due to the economic downturn.

Morgan Stanley's well-known U.S. stock bear, Michael Wilson, stated that although investors are generally pessimistic about the prospects for U.S. economic growth, corporate profit expectations are still too high, and the equity risk premium is at its lowest level since 2008. He said this means that if a mild recession occurs, the S&P 500 index could fall far below the 3500-3600 points currently expected by the market. Wilson said, "This consensus may be correct in direction but wrong in scale." He warned that the S&P 500 index could bottom out around 3000 points, about 22% lower than the current level.

The hawkish remarks of Federal Reserve officials also affected commodities such as crude oil and gold, with Brent crude oil futures prices also plunging. Recently, as the U.S. dollar has weakened, gold has continued to strengthen, but last night COMEX gold also experienced a slight dip.Back to A-shares, we believe that the hawkish remarks by Federal Reserve officials last night, which led to a plunge in U.S. stocks, will have a limited impact on A-shares. The recent surge in A-shares has been mainly driven by the appreciation of the renminbi and the accelerated purchases by foreign capital. Last night, the U.S. dollar index did not see a significant rebound, and the offshore renminbi exchange rate did not experience a substantial devaluation. The marginal impact of the Federal Reserve's interest rate hikes on A-shares has gradually diminished. Unless the Federal Reserve continues with aggressive rate hikes leading to a hard landing in the U.S., what needs attention this week is the U.S. December CPI data to be released on Thursday.

Risk warning:

The stock market involves risks, and investment should be approached with caution. This article does not constitute investment advice, and readers should think independently.