Will the LPR cut interest rates in the week?

A list of major financial events in the week from February 19th to February 23rd, the following are Beijing time:

This week's highlights: China's February LPR**, the Federal Reserve and the European Central Bank release the minutes of the January monetary policy meeting, the Eurozone CPI for January, the United States and Japan, the Eurozone France, Germany and the United Kingdom PMI data for February.

The U.S. earnings season is coming to an end, with a focus on Nvidia's earnings report, in addition, Walmart, Trip.com, Nestle, Mercedes-Benz and others will also report their latest earnings next week.

Will the LPR drop in February? On Tuesday (20 February), the People's Bank of China (PBOC) will announce the February LPR**.

Check the schedule, see the calendar, click to view the 18th, the first operation time after the Lunar New Year,The People's Bank of China continued to increase parity by 500 billion yuan MLF. Half of the LPR rate is formed by the MLF rate plus points, and although the MLF rate remained unchanged in February, there are still analysts who believe that the LPR will fall.

According to the Financial Times, in December 2023, major banks cut their medium- and long-term deposit rates again. On January 25, the People's Bank of China lowered the relending and rediscount rates by 025 percentage points, on February 5, the RRR was cut by 05 percentage points, releasing about 1 trillion yuan of medium- and long-term low-cost funds, these policy measures have effectively reduced the cost of medium- and long-term liabilities of banks. There have been precedents in history where the MLF rate has remained unchanged but the LPR has fallen, and the LPR** bank will lower the rate based on factors such as the cost of funds, market supply and demand, and risk premium**. Considering that the adjustment of deposit interest rates only affects new deposits, as the policy effect continues to be reflected, the cost of funds of LPR** banks will decrease, and it may reduce its own ** accordingly, and push LPR downward.

According to the comprehensive analysis of market participants, the MLF continues to exceed the renewal, the liquidity of the banking system is reasonable and abundant, and the interest rate (LPR) of the loan market may fall in two days, and the LPR with a maturity of more than 5 years is more likely to decline.

From the perspective of the international situation, although there is uncertainty about the timing and pace of interest rate cuts by central banks in major developed economies, it is a high probability event that interest rates will start to be cut within the year. China's interest rate policy adheres to the principle of focusing on me, and will continue to guide the comprehensive financing cost of the society to decline steadily, further stimulate the effective demand of the real economy, and consolidate and enhance the upward trend of the economy.

Tianfeng** also believes that the LPR still has downside and may be asymmetrically lowered, and the 5-year LPR rate may fall more than the 1-year LPR rate. Tianfeng ** Song Xuetao said:

"In the context that the central bank has made it clear that it is necessary to strengthen the supervision, management and assessment of LPR**, and provide strong support for promoting the steady and moderate decline of social comprehensive financing costs", we expect that the MLF interest rate may remain unchanged in February, but the LPR interest rate may be lowered, indicating that the monetary policy easing will be increased. "The core reason for the LPR rate cut in February is the current weak domestic fundamentals. The PMI for January 2024 is 492%, which is below the boom and bust line, and in such a situation, the policy is becoming more proactive. For example, the real estate policy in Shenzhen and other places continues to be relaxed, and the central bank has cut the reserve requirement ratio significantly. ”

The Federal Reserve and the European Central Bank released the minutes of the monetary policy meeting On Thursday (February 22), the Federal Reserve released the minutes of the January monetary policy meeting.

In January this year, the Federal Reserve announced that it would maintain the target range for the federal interest rate at 525% to 550% unchanged. Inflation data that recently exceeded expectations cast a shadow over the Fed's interest rate cut prospects. In January, the CPI exceeded expectations year-on-year and month-on-month, with the core CPI increasing month-on-month hitting the largest increase in eight months. Nick Timiraos, a financial journalist known as the "New Fed News Agency", wrote an article pointing out that the US CPI was higher than expected, which disappointed investors who hoped that the Fed would cut interest rates as soon as possible. According to reports, the current ** level is still well above pre-Covid levels. In January, the U.S. Department of Labor measured 19 percent of overall consumers** compared to four years ago, before the pandemic6%。In comparison, in the four years to January 2020, there was a cumulative 89%。Powell previously said in an interview that the Fed would like to see more evidence that inflation is returning to its 2% target. After the release of the CPI data, swap contracts showed that the Fed will cut interest rates by less than 100 basis points in 2024, and the probability that the market will fully price in the Fed's rate cut from June to July and the probability of a rate cut in March has dropped to almost zero. However, Wall Street now expects the Fed's preferred PCE data to show a slowdown in inflation. Due to the differences between PCE and CPI in the composition of sub-indicators, the proportion of housing sector indicators in the PCE** index is not as large as that of the CPI, and the medical services** that have vigorously pushed the CPI higher this time are not included in the PCE index. Jeffrey Gundlach, the "new debt king", said that despite the expectation of the CPI hammer rate cut, the PCE will be more important than the CPI after that, he believes

"[The January PCE indicator] is not possible, but it's also impossible for the Fed to talk about a rate cut. ”

"We don't want to risk a reversal of the decline in inflation, which would waste everything we've done and cause us to have to do more. ”

We are confident that we will reach our 2% inflation target in a timely manner. ”

Nvidia announced its 2024 Q4 earnings report At 6:00 a.m. on Thursday (February 22), Nvidia will announce its latest quarterly earnings report.

Benefiting from the AI boom, since the beginning of this year, Nvidia, the "first chip stock", has risen 47%, and has soared 230% in the past year, Bank of America, Goldman Sachs, Morgan Stanley have raised the target price of Nvidia, and Loop Capital has given Nvidia the highest target price in history of $1200. According to analysts at Loop Capital, the reason for such a high price target is the belief that Nvidia is on the "front end" of a multi-year cycle as investors bet on its AI prospects and as hyperscale computing centers transition to larger-scale graphics processing unit computing. Nvidia's third-quarter results continued to crush expectations: third-quarter revenue of 181200 million US dollars, a year-on-year increase of 206%; Non-GAAP adjusted EPS for the third quarter was 402 US dollars, a year-on-year increase of 593%. Factset data shows that in the previous 20 quarters, Nvidia had 19 quarters of performance that exceeded market expectations. In terms of performance guidance, Nvidia expects Q4 2024 operating income to be $20 billion, plus or minus 2%, which is equivalent to a guidance range of between $19.6 billion and $20.4 billion. Analysts expect fourth-quarter revenue of $17.9 billion, up about 196% year-over-year. Some commentators said that Nvidia's fourth-quarter revenue guidance, while higher than the average market expectation, was lower than the expectations of some Wall Street people with high expectations, who expected a maximum of $21 billion. This equates to Nvidia's guidance being 4 below its high-end expectations8%。Nvidia's chief financial officer (CFO) Colette Kress warned at the same time as the earnings report that in the fourth quarter, Nvidia's sales are expected to decline sharply in regions restricted by the new export rules of the United States in October. Some analysts said that the resurgence of inflation and the gloomy prospect of interest rate cuts briefly ended the rapid rally of U.S. stocks since the beginning of the year, and now, the market's attention has turned to Nvidia's earnings report - investors generally believe that whether the AI boom can continue is the key question that determines the outlook of U.S. stocks.

Other important data, meetings and eventsUS Markit PMI for February On Thursday (February 22), the United States released the preliminary Markit services, manufacturing and composite PMI for February. The US Markit manufacturing and services PMI data for January both exceeded expectations, and the preliminary manufacturing PMI was 503. A new high since October 2022; The preliminary value of the service PMI was 529, a seven-month high. Commenting on the PMI data, Chris Williamson, chief business economist at S&P Global Market Intelligence, said that the preliminary January PMI data showed that the US economy is off to an encouraging start to the year, with companies reporting a marked acceleration in economic growth and a sharp cooling of inflationary pressures. However, the financial blog zerohedge poured cold water on the data, saying that the data showed a big problem, that is, the delivery time was extended, which was the first time in more than a year, highlighting the recurrence of the bottleneck of the ** chain. France Germany Eurozone PMI for February On Thursday (February 22), France, Germany, and the Eurozone will release manufacturing, services, and composite PMI data for February. The preliminary Eurozone manufacturing PMI was 46 in January6, compared with the previous value of 444 rebounded, exceeding expectations by 447, a nine-month high, indicating a recovery in business activity and less recessionary pressures, with improvements in the manufacturing sector offsetting a further decline in the services sector. The PMI in Germany and France, the two pillars of the European economy, was also sluggish in January, with French manufacturing output shrinking more significantly than Germany. Germany's January PMI manufacturing PMI increased from 43 in December3 rises to 454. Higher than expected and the previous value, but still in the contraction range. The services sector saw the biggest drop in five months, from 493 to 476。Composite PMI for the seventh consecutive month**, up from 47 in December4 fell to 47 in January1, which is lower than the economist's 478。Cyrus de la Rubia, chief economist at Commerzbank Hamburg, said:

"There is positive news about business activity in the eurozone, with the decline in manufacturing generally easing last year, but the contraction in services output has increased.

And the recovery in the cost of output is likely to disappoint the ECB, which is trying to get inflation back to its 2% target. In the ongoing discussion around the best timing of the ECB's rate cuts, the PMI indicator echoes the ECB's hawkish sentiment. ”

In January, the Bank of Korea (BOK) held its benchmark interest rate at 3 for the eighth consecutive time in its first interest rate decision of the year5% unchanged, extending the fight against inflation into the new year. According to Xinhua Finance, the Bank of Korea removed the phrase "need to further raise the benchmark interest rate" from the statement. The Bank of Korea will maintain a restrictive policy stance for long enough. South Korea's GDP growth is expected to be broadly in line with previous November forecasts, the Bank of Korea said. The inflation rate is likely to fluctuate around 3% for some time. Consumption and real estate investment are likely to recover slowly; Increased risk in financing real estate projects. Bank of Korea Governor Rhee Chang-yong said consumption was weaker than expected and that the need for further interest rate hikes had diminished. The five members of the Policy Committee believe that the current 3The 5% interest rate level is the peak, and there will be no rate cuts in the next three months. It will be difficult to cut rates for at least the next six months. Walmart announces 2024 Q4 earnings report On Tuesday (February 20), Walmart will announce its latest earnings before the U.S. stock market. Consumer giant Walmart's third-quarter financial report showed that total revenue was $160.8 billion, a year-on-year increase of 52%；Operating profit was $6.2 billion, up 130. year-over-year1%；Adjusted earnings per share were 1$53. In the context of inflation, the trend of commodity consumers giving priority to daily necessities is becoming more and more prominent, which is conducive to the development of Wal-Mart's retail business to a certain extent. Following the earnings release, CFO John D**id Rainey said the retailer saw some worrying signs at the end of the quarter, with both sales and volumes weaker in late October than in the rest of the third quarter. The rebound in demand in November was partly due to increased activity during the seasonal season and holiday season. A-shares will open trading in the Year of the Dragon on Monday (February 19), and the A** market will open the first trading day of the Year of the Dragon. According to the Shanghai ** newspaper, historical data statistics show that the probability of a ** field in a natural month after the Spring Festival is relatively large, and the Shanghai Composite Index is an example, in the past 10 years, the ** probability has reached 90%. During the Spring Festival holiday of A-shares, Hong Kong stocks have shown a strong trend. From February 14 to February 16, the Hang Seng Index was **. 41% and 248%, with a cumulative increase of 377%。

In the week of the IPO (February 19-February 23), 1 new A-share was issued.

A total of 52 new ** issuances (combined statistics of class A and class C) were issued that week, including 29 index**, 15 bond**, 9 hybrid**, and 2 FOFs.

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