SignalPlus Macro Research (20230718): US Economy Better Than Expected, Market Remains Optimistic

Japan's holiday closure and Hong Kong's market closure due to typhoon signal No. 8 are gradually leading the market into a state of low liquidity in the summer. The New York market is also calm, with fixed income trading volume only half of the normal level. The market is hovering around last Friday's level and still leaning towards risk preference. The weak economic data from China (second quarter GDP growth of 6.3% YoY vs expected 7.3%) slightly affected the sentiment in the European market earlier, but had no negative impact on subsequent trading in the US market.

US interest rates fell by about 5 basis points across the board, while the stock market rose again, driven by technology stocks and growth stocks. Real estate and utilities stocks showed signs of outflows. In addition, Treasury Secretary Yellen said that although "slower economic growth in China may have some negative spillover effects on the United States," the US job market remains strong, and she expects the Federal Reserve to lower inflation without weakening the job market. She also believes that the US can avoid an economic recession. Yellen's comments further fueled the market's optimistic risk sentiment.

US bonds rose sharply, and combined with the ongoing risk appetite in the US stock market and the trade-weighted US dollar, the financial situation in the US relaxed significantly during the past week. In addition, US economic data performed significantly better than expected, and current activity data also improved significantly, leading to a corresponding upward revision of second quarter GDP expectations.

Aside from the retail sales data to be released today, economic data this week will be relatively subdued. As Federal Reserve officials enter a quiet period, trading activity may continue to decrease, and there is a lack of important data that could affect the market. The market may continue to settle into the current narrative and trend of slowing inflation.

However, as economic data becomes more subdued, financial reports will be more heated. Major banks that have not yet released their financial reports will announce their profit results this week, and Tesla and Netflix will also be the first to announce the performance of the technology industry after the market closes on Wednesday.

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