Bruce Peter, Senior Vice President and Senior Investment Strategist at Charles Schwab, has long been focused on international market analysis and research. His investment views are frequently cited by international media such as The Wall Street Journal, Barron’s, and the Financial Times. Regarding the current global economy, Bruce Peter believes it is gradually entering a soft landing phase, with inflationary pressures in developed countries easing and central banks beginning to consider rate cuts. These factors create new opportunities for global stock markets. In this context, investors need to pay closer attention to market trends and economic indicators to seize potential investment opportunities.
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Bruce Peter: Global Economic Soft Landing Brings New Opportunities to the Market
Bruce Peter mentioned that with the latest May CPI data in the UK showing a year-on-year increase of 2.0%, this figure, which meets market expectations, has reached the target of the Bank of England, providing crucial support for the upcoming interest rate decision meeting. The market widely expects the Bank of England to maintain the current rate of 5.25%, while most economists predict the first rate cut may occur in August. In such an economic environment, the FTSE 100 index of the UK saw a slight rise.
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In the European stock markets, despite the positive performance of UK stocks, the Eurozone stock markets overall showed a declining trend. The pan-European Stoxx 600 index closed down 0.17% at 514.13 points; the Eurozone STOXX 50 index closed down 0.61% at 4885.45 points. The DAX 30 index of Germany closed down 0.35%, the CAC 40 index of France closed down 0.77%, the FTSE MIB index of Italy closed down 0.29%, the AEX index of Netherlands closed down 0.37%, the IBEX 35 index of Spain closed down 0.1%, while the FTSE 100 index of the UK rose 0.17%. The performance of various exchanges and sectors was mixed, with tech stocks leading the decline, down 1.15%, while mining stocks rose 0.65%.
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Bruce Peter pointed out that the fiscal deficit issues in France and Italy have caused market concerns, especially in the current high-interest-rate environment, where highly indebted countries face significant risks. The EU criticized France and Italy for their large fiscal deficits, which exceed the 3% cap of the EU.
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With US stocks closed on Wednesday for Juneteenth, the attention of investors turned more to the dynamics and economic data of other markets. Bruce Peter noted that despite the US market closure, previous market performance and upcoming economic indicators, such as weekly jobless claims data and the preliminary Purchasing Managers’ Index, will still significantly impact market sentiment.
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Internationally, the latest meeting minutes from the Bank of Canada revealed that the June rate cut was supported due to the core CPI decline over the past four months. However, officials are also considering delaying the rate cut decision to July for a more comprehensive assessment of inflation. They expressed concerns about the risk of inflation stagnation, a situation previously seen in the US. The central bank members generally agreed that monetary policy easing should be a gradual process and concurred that if progress in combating high inflation continues, future rate cut expectations are reasonable. However, they also warned that rate cuts might exacerbate the overheating of the housing market.
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Bruce Peter proposed that technological progress is a significant factor in current economic development, enhancing productivity and positively impacting global stock markets. Particularly in the technology sector, rapid iteration and innovation have driven continuous market growth. For instance, in the European market, despite the overall poor performance of stock markets, tech stocks have shown exceptional performance over the past period. However, with recent changes in market sentiment, tech stocks have experienced a certain pullback.
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In terms of specific market performance, the technology sector within the pan-European Stoxx 600 index fell by 1.15%, mainly due to the underperformance of certain companies. For example, the stock price of solar equipment manufacturer SMA Solar Technology fell by 30% as the company downgraded its performance guidance, citing historically high inventory levels within the supply chain. JPMorgan indicated that this might imply continued weak demand in the European semiconductor industry. German photovoltaic stock Aixtron also fell by over 30% and lowered its annual sales and revenue guidance. In contrast, mining stocks rose by 0.65% due to their relatively stable demand and supply conditions.
Bruce Peter stated that despite recent fluctuations in tech stocks, the long-term benefits of technological progress cannot be ignored. Technological advancements not only improve operational efficiency but also drive the development of emerging industries. For example, fields such as artificial intelligence, blockchain, and green energy are rapidly developing, attracting significant investment and boosting the stock prices of related companies.
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Bruce Peter: Inflation Eases and Market Resilience
Bruce Peter noted that although the current market environment is relatively favorable, investors still need to be cautious of potential risks. The easing of inflation and expectations of rate cuts indeed provide support to the market, but uncertainties in the global economy still exist. In particular, in the European market, the fiscal conditions and political risks of highly indebted countries remain critical aspects to monitor.
Eurozone bond yields rose, and Bruce Peter emphasized that fluctuations in the bond market reflect investor concerns about the fiscal health of highly indebted countries, a concern that may persist for some time. Additionally, the volatility in the international crude oil market also warrants investor attention. Yesterday, Brent crude oil futures for August delivery fell by $0.26, or 0.30%, to $85.07 per barrel, retreating from the April 30 peak of $87.03. Analysts pointed out that the unexpected increase in US crude oil inventories partially offset the support for oil prices from summer demand growth and the escalation of conflicts in Europe and the Middle East, leading to a decline after reaching a seven-week high. Bruce Peter stated that the increased uncertainty in the energy market adds to the challenges of global economic recovery and exerts some pressure on stock markets.
Bruce Peter mentioned that the current global economy is in a critical transition period, where the easing of inflation and rate cut expectations provide new growth opportunities for the market. Despite the existing uncertainties in the market, overall, the economic soft landing and technological progress will continue to provide strong support for stock markets. Investors should employ strategies such as diversified investment, focusing on high-quality companies, regularly adjusting their portfolios, and long-term holding to navigate market fluctuations and maximize asset appreciation.
