Analysis: The long-end pricing anchor has clearly shifted to the "growth/AI cycle," and the market's pricing power over U.S. inflation is rapidly decaying.

PANews October 18 news: CITIC Securities released a research report pointing out that U.S. September CPI rose 3.7% year-on-year and PPI rose 6.3% year-on-year, both exceeding expectations in succession, but the reaction of long-end U.S. Treasury yields rapidly faded within 24 hours: after the CPI release on October 14, the 10-year U.S. Treasury yield was the first to spike by about 13bp to 5.325%, then gave back the gains and closed lower; by the time PPI was released on October 15, the 10-year yield rose only very slightly by about 2.5bp, the 30-year yield fell directly, and the 10-year yield then quickly retreated to around 5.048%.

The market's pricing power over inflation is rapidly exhausting, and the long-end pricing anchor has clearly shifted to the "growth/AI cycle"—the "recession" it prices is essentially the tail risk of a downturn in the AI capital expenditure cycle, rather than a traditional demand recession, and can coexist with stagflation. At present, this is still left-side exploratory pricing and does not yet constitute trend confirmation. In the short term, U.S. equities may continue sector rotation, with funds switching from AI themes to energy, defensive daily consumer staples, and healthcare, which may benefit from expectations of a Democratic sweep in the midterm elections. Hong Kong stocks may also benefit from the reversal of overseas AI hardware trades and from fund allocation brought about by Indonesia potentially being removed from the MSCI Emerging Markets Index.