Last month, the U.S. inflation data for February exceeded expectations, and the ISM Manufacturing Index for March, announced on Monday evening, unexpectedly rose to 50.3, entering the expansion territory for the first time since September 2022. Although Federal Reserve officials still retain the expectation of three rate cuts within the year, the market has already stopped anticipating a rate cut in June. The yield on U.S. ten-year bonds has rebounded continuously, once breaking through the 4.4% mark, setting a new high since December last year.

Compared to the resilience of the U.S. economy, the European economy is much weaker, especially Germany, with the CPI for March announced yesterday at 0.4%, lower than the market's expectation of 0.6%. European Central Bank official Holzmann stated that he does not object to a rate cut in June in principle, but he hopes to see more supportive data. The Swiss National Bank has already begun to cut interest rates in March.

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The U.S. economy is resilient, while the European economy is weak. If the European Central Bank cuts interest rates before the Federal Reserve, the euro will depreciate significantly, driving the U.S. dollar index higher, thus creating a siphon effect on Europe. The long-awaited rate cut in the U.S. has not yet arrived, but it seems that America's allies can no longer hold on.

As commodities are priced in U.S. dollars, generally, a stronger dollar leads to a decline in commodity prices. Historically, there is an inverse relationship between gold prices and U.S. real interest rates. However, recently, the rise in U.S. ten-year bond yields and the strengthening of the dollar has not led to a decline in the prices of gold, crude oil, and other commodities; instead, they have moved in tandem.

It can be observed that in the past month, gold prices have experienced two rounds of accelerated increases. Today, the COMEX gold price once broke through $2,300 per ounce, and the Shanghai gold price closed above 541 yuan per gram. In addition to gold, crude oil, copper, aluminum, and other commodities have also skyrocketed, all reaching recent highs.

Compared to the commodity boom, global stock markets were suppressed by U.S. bond yields and the dollar today. U.S. stocks fell sharply last night, with the Dow Jones Industrial Average down by 1% and the Nasdaq down by 0.95%. Today, stock markets in the Asia-Pacific region generally fell, with the Hang Seng Index in Hong Kong falling by more than 1%, the South Korean Kospi falling by 1.68%, and the Nikkei 225 falling by nearly 1%.

Looking specifically at the A-share market, due to the approaching Qingming holiday, there is a strong risk-averse sentiment before the holiday, and the market shows a severe reduction in trading volume. Resource stocks such as coal and non-ferrous metals have soared, while technology stocks have been neglected. Although technology stocks once pulled up a wave with the help of an earthquake, they still failed to outperform resource stocks. By the close, the Shanghai Composite Index fell by 0.18%, and the ChiNext Index fell by 1.08%. The total turnover of the two markets shrank to 0.91 trillion, and the net outflow of foreign capital was 2.275 billion, with more than 3,400 stocks falling.Looking at the industry perspective, non-ferrous metals, coal, agriculture, forestry, animal husbandry, fisheries, petroleum and petrochemicals, and textiles and apparel industries are leading the gains, while the computer, media, communications, beauty and personal care, and automotive industries are leading the declines.

After spending some time in the A-share market, one will find that it is a highly stylized market. Due to the predominance of speculative capital and retail investors, the pricing exhibits a very strong trend mindset, which can be bluntly described as chasing gains and cutting losses. Whenever an industry shows a profit effect, it is usually swarmed by investors, which can lead to a siphoning effect on other sectors, resulting in an extreme phenomenon where only one side is rising. A market trend that could have lasted for a while is often overspent in a very short period due to the speculative herd mentality, and after a round of speculation, the funds that chased the gains can get trapped at the peak.

Currently, the A-share market's cyclical sectors such as non-ferrous metals have entered a phase of accelerated and frenzied increases. The market is telling stories like "the surge in gold prices is the prelude to a bull market in cyclical stocks," and gold itself is telling a story of "the collapse of the US dollar's credit." It is true that due to the abuse of hegemony by the US dollar, countries are indeed leaning towards diversifying their international reserves. However, the credit of a credit currency depends on a nation's future productivity. If even the credit of a country like the United States, which leads globally in technological innovation and AI technology, is to collapse, then whose currency would not collapse? One should not be bullish on AI while simultaneously bearish on the United States.

Of course, during the rise, all news is positive, and gold has the final say when it surges. We do not believe at all that the global economy will experience a strong recovery this year. The European economy is in recession, the US economy is in a state of stagflation, and we also rely on external demand. The story of reflation simply does not hold water. There is no problem with global central banks lowering interest rates, but without massive money printing like in 2020, there will not be significant inflation.