December 7th Macroeconomic Index: China Focuses on Interest Rate Management and Capital Market Stability, US Core Inflation Eases

   Daily Macro Economy News

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Domestic News

1. Reasonably grasp the level of interest rates and promote the cost reduction of corporate financing and residents' credit

2. Yi Huiman, chairman of the China Securities Regulatory Commission, stated that every effort would be made to maintain the smooth operation of the capital market and better play the role of the capital market hub. We will strengthen the monitoring of stock market trading behavior and capital flows, and establish and improve a comprehensive risk research and early warning mechanism

3. The State-owned Assets Supervision and Administration Commission of the State Council emphasized that it should focus on the "four areas" of trust companies, finance companies, commercial factoring companies, and private equity investment funds, and resolutely prevent and resolve the business risks of the financial sector of central enterprises

4. There are many challenges in funding at the end of the year, and experts suggest to reduce the reserve requirement ratio to "quench thirst"

International News

1. Central New York Fed: Core inflationary pressures in the United States eased in October

2. The EU urges an agreement on funding for Ukraine in 2024 as soon as possible

3. BNP Paribas: This week's non-farm payrolls data may mask the cooling of the labor market, but it is not enough to prove that interest rate cuts are imminent

4. The Palestinian side said it firmly rejects Israel's reoccupation of the Gaza Strip

Domestic News

1. Reasonably grasp the level of interest rates and promote the cost reduction of corporate financing and residents' credit

We will improve the two-pillar regulatory framework of monetary policy and macro-prudential policy, maintain the stability of the RMB and financial stability, and promote full employment and economic growth. We should rationally grasp the level of interest rates, promote the cost reduction of enterprises financing and residents’ credit, promote legislation on financial stability, take early identification, warning, exposure and disposal of financial risks, and improve the mechanism for early correction of financial risks with hard constraints.

2. Yi Huiman, chairman of the China Securities Regulatory Commission, stated that every effort would be made to maintain the smooth operation of the capital market and better play the role of the capital market hub. We will strengthen the monitoring of stock market trading behavior and capital flows, and establish and improve a comprehensive risk research and early warning mechanism

Yi Huiman, chairman of the China Securities Regulatory Commission, emphasized that he would make every effort to maintain the smooth operation of the capital market and better play the role of the capital market hub. We will strengthen the monitoring of stock market trading behavior and capital flows, and establish and improve a comprehensive risk research and early warning mechanism. Improve the counter-cyclical adjustment mechanism of the primary and secondary markets, encourage and guide listed companies to repurchase and shareholders to increase their holdings, and give full play to the internal role of various business entities in stabilizing the market. Strengthen the source management of potential risks and hidden dangers such as the occupation of funds by major shareholders, excessive leverage, and lack of isolation between industrial capital and financial capital. Resolutely eliminate the regulatory vacuum. Coordinate with relevant departments to strengthen the monitoring and supervision of debt risks of large enterprise groups.

3. The State-owned Assets Supervision and Administration Commission of the State Council emphasized that it should focus on the "four areas" of trust companies, finance companies, commercial factoring companies, and private equity investment funds, and resolutely prevent and resolve the business risks of the financial sector of central enterprises

The State-owned Assets Supervision and Administration Commission of the State Council emphasized that focusing on the "four areas" of trust companies, financial companies, commercial factoring companies, and private equity investment funds, resolutely prevent and resolve the business risks of the financial sector of central enterprises, and at the same time, it is necessary to comprehensively study and judge the overall risk of the corporate financial sector, take early identification, warning, exposure and disposal of risks, and once the risk emerges, it is necessary to take decisive action to eliminate it in the bud and block it at an early stage, and establish and improve a long-term mechanism to firmly guard the bottom line of no systemic risk.

4. There are many challenges in funding at the end of the year, and experts suggest to reduce the reserve requirement ratio to "quench thirst"

Zhang Jiqiang, deputy director of Huatai Securities Research Institute, said that at present, the People's Bank of China tends to use the "reverse repo + MLF" method to hedge the liquidity gap, but this can only solve the problem of quantity, it is difficult to solve the problem of indicators and expectations, and the core reason is that the scale of reverse repurchase is too great, but the term is too short. He believes that there are many challenges to the capital side at the end of the year, and the People's Bank of China needs to consider ways to stabilize expectations such as RRR cuts, and at the same time prepare for credit delivery early next year. Cheng Qiang, chief macroeconomic analyst of CITIC Securities, also said that according to estimates, even if the issuance of special refinancing bonds is not considered, there will be about 1.5 trillion yuan of government bonds to be issued in December, which will put pressure on the capital side. On the whole, the People's Bank of China is likely to implement a RRR cut in December to replenish long-term liquidity and strengthen coordination with fiscal policy.

International News

1. Central New York Fed: Core inflationary pressures in the United States eased in October

The New York Fed reported on Monday that its Multivariate Core Trend Inflation Index (MCT) came in at 2.6% in October, lower than 2.88% in September. The October MCT was also in line with the six-month trend of the closely focused Personal Consumption Expenditures (PCE) price index, which rose 2.5% in October. The Fed said the current average level of MCT is higher than that before the pandemic, in large part due to trends specific to housing and the services sector except housing. The New York Fed MCT Index is designed to measure the persistence of inflation and the extent to which price pressures have changed. The index peaked at 5.44% in June 2022. The report comes at a time when the Fed's current interest rate levels appear to have peaked.

2. The EU urges an agreement on funding for Ukraine in 2024 as soon as possible

On December 5, European Commission spokesperson Ana said at a press conference in Brussels that the European Commission called on EU countries to agree on the allocation of funds for aid to Ukraine as soon as possible so that it can continue to be funded in 2024. At present, the issue of the EU negotiating an increase in the budget for the period 2024-2027 has not been resolved, including the continuation of 50 billion euros of macro-financial assistance to Ukraine. Without this agreement, Brussels' financial support for Kyiv could end as early as January 2024.

3. BNP Paribas: This week's non-farm payrolls data may mask the cooling of the labor market, but it is not enough to prove that interest rate cuts are imminent

On December 5, BNP Paribas said in a report that the expected increase in new jobs in the United States in November may be due to the return of strikers masking the slowdown in hiring. Carl Riccadonna, the bank's chief U.S. economist, said the jobs report, scheduled for Friday, could "support the Fed's recent rhetoric that the Fed may be in a favorable position on policy." Economists polled by the Wall Street Journal expect 190,000 new non-farm payrolls to be created in November, up from 150,000 in October, and the unemployment rate expected to hold steady at 3.9% and average hourly earnings to fall to 3.9% from 4.1% annually. Riccadonna said the data is not expected to be "too weak to justify an imminent rate cut".

4. The Palestinian side said it firmly rejects Israel's reoccupation of the Gaza Strip

On December 5, Palestinian President Mahmoud Abbas issued a statement on December 4 local time, saying that he rejected Israel's "division, occupation, cutting off or isolation from any part of the Gaza Strip". The Gaza Strip is an "integral part" of Palestine. On the same day, Palestinian News Agency quoted Palestinian Prime Minister Ashtiyeh as saying that Israel was reoccupying the Gaza Strip and planned to establish a buffer zone in the area. Palestine resolutely rejects this and calls on the international community to oppose Israel's act.

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