As we mentioned last week, the Chinese stock market experienced a broad pullback this week, with trading volumes steadily declining to around 700 billion yuan. On June 7th (Friday), some blue-chip stocks saw significant retreats. According to the performance of the candlestick charts, a 5% decline in some blue-chip stocks no longer finds support levels. Who is selling off on such a large scale?
In terms of news, the increase in the number of ST stocks is notable. According to some reports, there are currently about 20 stocks meeting the delisting criteria. In terms of liquidity, the People’s Bank of China did not roll over last week’s 800 billion yuan, which has had some impact on the stock market. Additionally, most media outlets have been reporting on the warming real estate market this week. If real estate is considered the anchor of Chinese assets, then the capital market should not be experiencing a large-scale pullback. In the coming week, China will enter the period of disclosing its May economic data. This Friday, the import and export data was released, showing a significant rebound, and foreign exchange reserves have increased, which should be seen as relatively positive news. Given the current trade friction risks between China and Europe, stocks related to shipping that had previously risen might be at risk of being overbought. Next week, the 3000-point defense battle will be fought again.
On the international front, the Nasdaq hit a new high, the dollar index fell to 104, and the yields on U.S. 2-year and 10-year Treasury bonds pulled back sharply. Bitcoin prices surged past 71,000. Data released in the U.S. this week showed a clear divergence between manufacturing and services PMIs, with the unemployment rate ticking up and job creation exceeding expectations. The unexpected increase in job creation suppressed the U.S. stock market’s performance on Friday, suggesting that the Asian markets might not be particularly promising on Monday.
On June 11th, the crucial U.S. CPI data will be released. From the current market performance, the Dow Jones has retreated from its previous high, and the Nasdaq, supported by AI, remains strong but still influenced by macro factors. The release of this CPI data should be closely watched. This week, the Eurozone and Canada officially entered a rate-cutting cycle, and the expectation of the first rate cut in the U.S. has been pushed to November. If the U.S. CPI data next Tuesday falls below expectations, there could be a bullish period; if the CPI remains strong, global capital markets might see a significant pullback, which could be an opportunity to short digital currencies. The main variable now is the asynchronous monetary policies of major economies, disrupting the rhythm of capital markets and bringing some spillover effects to the domestic market.
What is certain is that dollar liquidity remains the pricing standard for global capital markets. The U.S. economy, driven by AI, is performing exceptionally well, raising the possibility of a U.S. rate cut, albeit smaller than those of major global currencies. Following the U.S. CPI release next Tuesday, the Federal Reserve meeting will follow closely, and the Fed is unlikely to cut rates but will likely provide future rate-cut guidance. It is worth betting on a dovish stance.