(i) U.S. economic growth slows at a high level, European economic recovery remains strong
The global economy as a whole is still in the recovery period after the epidemic. The U.S. ISM manufacturing PMI for April was 60.7%, significantly lower than the expected 65.0% and the previous value of 64.7%, but still at an all-time high; the ISM non-manufacturing PMI for April was 62.7%, weaker than the expected 64.3% and the previous value of 63.7%. April U.S. non-farm payrolls were significantly lower than expected, with 266,000 non-farm payrolls added, far lower than the expected 1 million. The unemployment rate was 6.1%, showing a slight rebound. The strong growth momentum of the U.S. manufacturing PMI has cooled, and the non-farm payrolls data is cold, or affected by the ongoing supply chain problems and material shortages. In addition, additional unemployment benefits introduced during the epidemic have dampened the motivation of the unemployed to return to the labor market. The White House’s previous $1.9 trillion stimulus package and expanded vaccination coverage caused a boom in demand, but also clashed with supply shortages. Because the epidemic disrupted labor market supply, it led to a shortage of supply, which in turn led to higher output prices, which, combined with long lead times, widespread shortages of key basic materials and difficulties in shipping products, continued to impact all aspects of the manufacturing economy. Eurozone manufacturing PMI was 62.9% in April, higher than the previous value of 62.5%, a record high since 1997, and the services PMI was 50.5% in April, higher than the expected 50.3% and the previous value of 49.6%, located above the Rong Kuk line. Among them, Germany’s manufacturing PMI was 66.2%, slightly lower than the previous value, but still at a high level; Italy’s manufacturing PMI was 60.7%, the highest level in history; Spain’s manufacturing PMI rose to 57.5%, the highest in 21 years. The market is generally optimistic that the eurozone economy will accelerate its recovery due to positive factors such as the accelerated pace of vaccination and the infection rate may have peaked.
(ii) ECB warns of financial stability risks, Fed hints at monetary policy or turn
As the negative impact of the epidemic tends to ease, overseas central banks have raised concerns about financial risks and monetary policy shifts. The European Central Bank recently said that with the eurozone carrying heavy debt out of the epidemic, as well as in the bond yields rise at a time of market “unusual prosperity”, the eurozone faces rising risks to financial stability, such as “spillover risks from the repricing of the U.S. stock market”, cryptocurrency asset “bubble boom”, real estate bubbles, labor market slack and weak investment. Due to the uneven economic impact of the pandemic, financial stability risks may surface in sectors and countries with pre-existing high vulnerabilities. early May 20, the Federal Reserve released the minutes of its April monetary policy meeting. The strong recovery in U.S. economic activity will trigger discussion of tightening monetary policy, the first time since last year’s quantitative easing that the Fed has sent this clear signal, and several Fed officials have hinted at the possibility of a shift in Fed policy and a pullback in the accommodative monetary policy stance. Against the backdrop of the epidemic’s negative impact easing, the focus of monetary policy has adjusted, and global capital market volatility may increase as a result.
(3) The difference in inflationary pressure between Europe and the United States is obvious, and the policy to promote growth is more important than stabilizing inflation
Inflation levels in Europe and the United States are at different stages, the differences are obvious. The U.S. CPI in April jumped 4.2% year-on-year, a record high since September 2008, exceeding expectations of 3.6%; core CPI in April jumped 3% year-on-year, the largest growth since January 1996, exceeding expectations of 2.3%. The Eurozone HICP of 1.6% year-over-year in April is close to the target set by the ECB of less than 2%, but core inflation is below 1% and still on the mend. Although global concerns about inflation have been exacerbated by the sharp rise in U.S. inflation data, the focus of policy administration in Europe and the U.S. in the short term remains on promoting growth, rather than on inflation, which is a concern to the outside world. The Fed chairman stressed repeatedly at the press conference that there are short-term factors such as low base and supply gap behind the high inflation data. In addition, there is still uncertainty whether Europe and the United States can usher in a sustained and strong economic recovery. First, the recovery of employment indicators in Europe and the United States will take time, with the unemployment rate in the eurozone expected to be as high as 8.4% in 2021 and the unemployment rate in the United States at 6.1% in April, well above the pre-epidemic level. Secondly, the economic recovery is still uncertain, once the effectiveness of policy stimulus fades, inflation remains high, and economic growth is still no improvement, Europe and the United States is afraid of stagflation problem. In addition, the continued spread of the epidemic so that the recovery prospects are unclear, since the second quarter, the epidemic continues, especially in India, the epidemic out of control, so that the world has been a little relaxed nerves again, the economic recovery prospects face greater uncertainty.
Overall, the global economy is still in the stage of emerging from the negative blow of the epidemic, inflationary pressure is gradually emerging, monetary policy remains loose, and the variables of central bank monetary policy have increased. In April, the Dow Jones Industrial Average rose 2.71%, the Nasdaq rose slightly by 5.40% and the German DAX rose 0.85%. in April, the 10-year U.S. bond yield went down 9BP to 1.65% and the 10-year German bond yield went up 6BP to -0.21%.