The Zhitong Finance App learned that CITIC Construction Investment Securities released a research report saying that after the implementation of the Federal Reserve's interest rate hike, the market experienced an improvement in trend, and interest rates on US bonds reached a high point in stages. The market is fiercely discussing the current rate hike path, which includes several rate hikes. The market focus should not be on this, because the future rate hike path is uncertain. Weakening the forward-looking guidance, as Walsh suggested, means that the Fed will have to take into account more dimensional variables in the future, and it is too early to discuss the number of interest rate hikes now. The current market really needs attention to the high-level meeting between China and the US. CITIC Construction Investment believes that this high-level meeting between China and the US can release more information on improving the trend. Therefore, it is possible that in the next one to two quarters, the market will usher in a very friendly period of improvement in wind bias.
A summary of the performance of major global asset classes last week:
Oil prices resonated with expectations of interest rate hikes last week. Global asset pricing turned defensive, equity assets diverged, interest rates rose, and commodities fluctuated.
Most broad-based indices of A-shares recovered and the growth style clearly prevailed; Hong Kong stocks closed down slightly as a whole, and Hang Seng Technology was relatively strong.
Major indices of US stocks had mixed ups and downs. The S&P 500 basically closed, and the technology sector had a relative advantage.
On the bond market side, the overall yield on Chinese bonds declined slightly, and US bonds leveled off, driven by the Federal Reserve's interest rate hike and inflation expectations. Short-term adjustments were even more significant.
In the commodity market, gold and copper rebounded after interest rate hikes were implemented, crude oil declined after experiencing a geopolitical surge, and the overall black shock weakened.
On the foreign exchange side, the US dollar index rose above 100, supported by hawkish interest rate hikes by the Federal Reserve; while the RMB bucked the trend, the yen weakened somewhat.
1. Chinese stock market: AH growth dominates
Last week's review of China's AH shares: AH has had an advantage in growth.
A shares: The market experienced a recovery and rebound last week. The growth style was dominant across the board. Science and Innovation 50 surged 6.39% in a single week, leading all broad bases. The small and medium capitalization index strengthened at the same time, and the large market blue chip performance was relatively weak. At the industry level, the electronics, communications and machinery sectors led the decline, while the coal, agriculture, forestry, animal husbandry and fishing, petroleum and petrochemical sectors led the decline.
H shares: The Hang Seng Index closed down slightly, and the Hang Seng Technology Index was strong; the core variable of the market was that the Federal Reserve's interest rate meeting unexpectedly sent a more hawkish signal. The new chairman raised interest rates for the first time after taking office and suggested that austerity might continue. Hong Kong immediately followed the increase in the benchmark interest rate, and the strengthening of the Hong Kong dollar and the pressure of capital return suppressed risk appetite. There is clear fragmentation at the industry level. Healthcare is led by accelerated approval of innovative drugs, overseas cooperation expectations, and progress in segmented circuit pipelines, while the energy sector is being dragged down by oil price expectations and leading the decline.
China Stock Market Outlook: Waiting for market recovery.
A shares: As we approach the long holidays, market trading sentiment usually tends to be cautious, and it may be difficult to form a continuous main line in the short term. Overall, it is dominated by weak volatility and structural adjustments. In terms of operation, it is recommended to follow the main line of fixing the low trend and focus on three types of high boom directions: one is AI upstream semiconductor equipment and materials, with strong certainty in performance delivery, and the cost performance ratio is prominent after the pullback; second, upstream resource products benefiting from the weakening dollar and supply constraints under two-wheel drive, including chemicals, industrial non-ferrous metals, etc.; and third, strong performance resilience and relatively low valuation, including non-bank finance, etc.
Hong Kong stocks: The Fed's interest rate hike “hit the ground” last week, but the tone was hawkish. The bitmap suggests that interest rates may be raised again during the year. The suppression of Hong Kong stock valuations by tightening overseas liquidity will be difficult to lift in the short term. After “bad times out” expectations fall short, the market may take time to reprice the “higher and longer” interest rate environment.
2. China bond market: The overall yield on Chinese bonds declined slightly last week.
Last week's bond market review: Overall Chinese bond yields declined slightly last week. Amid marginal convergence of internal capital and disturbance by the external Federal Reserve's interest rate hike, the bond market emerged from an independent “me-centered” market. Interest rate bonds narrowly strengthened, and medium- to long-term yields fluctuated downward. The yield on 10-year treasury bonds fell 0.79 bp to 1.682% throughout the week, and the yield on 30-year treasury bonds fell 2 bp to 2.126%. The short term was basically flat, and the yield curve flattened slightly.
Bond market outlook: The long and short game of the bond market continues, maintaining a pattern of low volatility. The central bank's recent refined operations have focused on ironing out cross-season capital fluctuations. The tax period continued to reverse repurchases overnight, and a 14-day reverse repurchase was added on September 18. The overall funding level is in a convergent but manageable range.
In the short term, the current yield has been reduced to a low level, and there is no clear catalyst for the downward trend. This is compounded by the peak supply of government bonds, end-of-season assessments, and financial disturbances before the Mid-Autumn Festival National Day holiday, as well as external constraints caused by the Federal Reserve's interest rate hikes, oil prices, and geographical disturbances. We judge that the market will remain low and volatile in the future. We recommend being neutral for a long period of time, focusing on changes in geopolitical events and focusing on the financial situation.
3. US stocks: The S&P 500 basically leveled off, with a 1.26% drop in terms of weight
US stock review: The major indices of US stocks had mixed ups and downs last week. The S&P 500 fell 0.08%, the Dow Jones fell 1.69%, the Nasdaq Composite Index rose 0.72%, the Nasdaq 100 rose 0.94%, the Russell 2000 fell 1.50%, and the Philadelphia Semiconductor Index rose 0.83%. The S&P 500 fell continuously on the first three trading days of last week, and the interest rate settlement was at a low level since July 31. The cumulative increase in the next two trading days was 1.31%, recovering most of the previous decline. Weighted indices such as the S&P 500 fell 1.26% throughout the week, falling 118 basis points behind the market capitalization weighted index, and the Dow Jones fell for the third week in a row.
In terms of sectors, 9 out of 11 sectors fell. Only healthcare rose 1.83%, information technology rose 1.03%, utilities fell 3.04%, finance fell 2.43%, and real estate fell 2.05%. The decline in the high-dividend sector corresponds to a 5% decline in 10-year US Treasury yields. The semiconductor industry chain is the main source of momentum: the heads of three leading artificial intelligence companies called for a slowdown in cutting-edge model development last weekend. The Philadelphia Semiconductor Index fell 5.86% on the first trading day of last week, extending the retracement from the June 22 closing high to 23.94%. Corning fell 13.70% on the same day, fell 9.78% throughout the week, and software sector ETFs rose 5.04% on the same day. Over the next four trading days, the Philadelphia Semiconductor Index rose 7.10% cumulatively, leading the way in storage and semiconductor equipment. SanDisk rose 9.70% throughout the week, and Micron rose 4.16% throughout the week.
US stock outlook: The core issue of current US stock pricing is profit sustainability. The subsequent upward trend in the index is expected to be driven by profit growth, and there is limited room for valuation expansion. Our benchmark judgment is that profit growth is slowing down and profit levels have not collapsed. The S&P 500 earnings per share growth rate is expected to be around 10% in 2027 and 2028. Short-term focus: pricing with interest rate hikes in October (currently around 55%), 2027 capital expenditure guidelines for cloud vendors, storage and chip prices, August PCE index announced on September 30.
4. Overseas interest rates: The Federal Reserve raised interest rates by 25 basis points, and the US debt curve flattened out
Review of foreign interest rates last week:
The US bond yield curve was flat last week, leading the short-term increase. The 2-year period rose 13 basis points to 4.76% for the full week, 5 basis points for the 10-year period to 5.01%, and the 30-year period down 1 basis point to 5.34%. The 2-year term hit a new high since July 2024; the 10-year period hit 5.041% in the intraday period and 5% at the close, hitting a new high since July 2007.
The Federal Reserve raised the federal funds target range by 25 basis points to 3.75% to 4.00% by 12-0, the first rate hike since July 2023. The bitmap shows that the median interest rate rose from 3.8% to 4.1% at the end of 2026. Of the 18 officials who submitted the forecast, 16 expected to raise interest rates at least once more during the year, and the median rate rose from 3.6% to 4.1% by the end of 2027. The statement removed the statement that part of inflation stemmed from supply shocks. Chairman Walsh called this action “the withdrawal of part of easing.” The market is pricing the interest rate hike again in October at about 55%.
Overseas interest rate and exchange rate outlook:
After the interest rate hike was implemented, short-term pricing changed from whether to raise interest rates to the end point of interest rate hikes. Currently, the market has included about three more interest rate hikes before mid-2027, which is higher than the median of the bitmap; historically, front-end forward interest rates rarely peaked clearly before the last rate hike, and the environment where the curve flattened until the end point is clear is expected to continue. On the long-term side, the expression “partial withdrawal of easing” helps to reduce inflation risk premiums. Resilience in investment spending and employment has kept long-term returns in a high range, and oil prices still dominate daily fluctuations.
5. Commodities: Gold and copper showed a “exhausted” rebound.
Last week's commodity review:
Last week, commodities operated under the dual main lines of “the Federal Reserve's restart of interest rate hikes” and the “Middle East geopolitical conflict”. The overall pattern showed a pattern of differentiation between precious metals and non-colored metals, high energy fluctuations, and weak black.
Gold: Last week, gold showed a typical “pressure before interest rate negotiation, rebound after interest rate negotiation” rhythm: expectations of interest rate hikes met in the first half of the week, 10-year US Treasury yields broke 5%, gold prices continued to weaken, and London gold prices “ran out of profit” to rebound continuously in the second half of the week, recovering all losses and hitting new highs during the week.
Copper: After the copper price shortfall ran out last week, the strong rebound in copper prices once again approached a high level, supported by low domestic inventories and peak season demand.
Crude oil: Last week, the crude oil market showed a typical high fluctuation pattern of “geographical rise - expected decline”. Geographic risk premiums pushed oil prices to new highs at the beginning of the week, but then quickly rebounded under multiple pressures from easing expectations, rising expectations of the Federal Reserve's interest rate hike, and high oil prices suppressing demand.
Domestic black: The overall black series surged higher and declined last week, ending the strong pattern from the end of August to the beginning of September. Last week, black was a shift from “strong dominated by contraction in supply” to a “decline led by negative feedback and expectations of policy resumption of production”, and cost support weakened.
Global Commodity Outlook:
Gold: If the Federal Reserve does not release a signal of continued austerity after the rate hike is implemented, the price of gold is expected to break through the convergence triangle upward.
Copper: New production capacity in global copper mines is limited. Copper for emerging industries such as new energy, UHV, and computing power infrastructure is expanding steadily, and the medium- to long-term upward logic of copper prices remains unchanged.
Crude oil: The market is in an inverse game supported by geopolitical conflicts and macroeconomic pressure suppressing, and market volatility is expected to be difficult to subside.
6. Foreign exchange: The Federal Reserve's hawkish interest rate hike boosted the US dollar, and the median price led the RMB to buck the trend and rise above 6.70.
Foreign exchange review: Last week, the overall foreign exchange market showed a pattern of “the US dollar strengthened rapidly, not the US was generally under pressure, but the RMB bucked the trend.” The US dollar index rose from around 99 to around 100.2, quickly breaking through 100 after the Federal Reserve raised interest rates in the middle of the week. The core driver of the US dollar returned to the “interest rate hike path+oil price”: the rise in oil prices at the beginning of the week boosted inflation and US bond yields, and the market further tightened expectations; after the Fed raised interest rates and released an eagle signal, the dollar strengthened further. Since then, oil prices have fallen from high levels, US bond yields have declined, and the increase in the US dollar has subsided somewhat. In other words, the current US dollar is not sensitive to oil prices themselves. What is really sensitive is that oil prices are transmitted to the path of interest rate hikes through inflation expectations and interest rates on US bonds.
Foreign exchange outlook: Looking ahead to the future market, the US dollar is likely to fluctuate at a high level of 100 in the short term. The core still depends on whether oil prices and inflation data can rise again and strengthen expectations for subsequent interest rate hikes. On the yen side, a single BOJ rate hike has proven to be insufficient to reverse the exchange rate. If USDJPY approaches 158-160 again, the risk of actual intervention will rise significantly. The RMB was the unusually strong currency worth watching last week: if the median price continues to be actively strengthened, USDCNH is expected to further test 6.65-6.70; if the median price becomes restrained again, it may enter a two-way fluctuation around 6.70.