June 1, 2023 - Fundamental Reminder

☆The U.S. House of Representatives is scheduled to hold a full House vote at 8:30 a.m. GMT on Thursday, and House Speaker McCarthy will hold a press conference on the debt ceiling bill at 9:15 a.m. GMT on Thursday.

☆9:45 CNY Caixin Manufacturing PMI (MAY)

Market generally expects the index to remain unchanged at 49.5 in May.

☆ 17:00 EUR Inflation Rate YoY Flash (MAY) & EUR Inflation Rate MoM  (MAY) & EUR Unemployment Rate (APR)

The median forecast of economists is 6.3%. If the data cools sharply as expected, it may weaken traders' expectations of the ECB's peak interest rate, as signals of weak economic growth in the Eurozone are increasing.

19:30 EUR ECB Monetary Policy Meeting Accounts

☆ 19:30 USD Challenger Job Cuts (MAY)

   20:15 USD ADP Employment Change (MAY)

   20:30 USD Initial Jobless Claims (MAY/27)

   21:45 USD Markit Manufacturing PMI Final (MAY)

   22:00 USD ISM Manufacturing PMI (MAY) & USD Construction Spending MoM (APR)

Analysis by the Gain Capital believes that if the employment data is strong, it may allow the Federal Reserve to seriously consider the option of raising interest rates. And a complete resolution of the debt ceiling issue could clear the last hurdle to future rate hikes, which is expected to continue to be positive for the dollar.

☆ 23:00 USD EIA Crude Oil Stocks Change (MAY/26)

This follows an unexpectedly sharp drop in U.S. EIA crude oil inventories in the previous week, raising concerns about low inventories. Meanwhile, U.S. crude oil drilling activity continues to retreat or signals a future production decline.

☆ The following day at 01:00, the 2023 FOMC voting member and Philadelphia Fed President Harker participates in a discussion on the global macroeconomic and monetary environment. Harker previously hinted support for skipping a rate hike in June.

Market Overview

Review of Global Market Trend

On Wednesday, after the release of the Chicago PMI data, which was significantly weaker than expected, spot gold pulled up briefly on the $1,970 mark, then gave back some of its gains due to stronger U.S. employment data to close up 0.18% at $1,962.67 per ounce. May fell more than $100 from its all-time high at the beginning of the month, the first monthly negative in three months. Spot silver closed up 1.34% at $23.52 per ounce.

The dollar index set a new intraday high of more than two months, but then narrowed its gains to a final close of 104.23 due to dovish speeches by some Fed officials. in addition, the onshore yuan fell below the 7.10 handle against the dollar for the first time since Nov. 30, 2022, according to China Money Network as China's manufacturing PMI fell slightly. U.S. Treasury yields continued to fall after expectations of a pause in rate hikes in June were supported, with the 10-year U.S. bond yield closing at 3.643%.

International crude oil fell more than 3% at one point, further approaching its lowest level of the year. Investors continue to be concerned about the demand outlook and appear to be betting that OPEC+ will not cut production further at its monthly meeting this Sunday. WTI crude rebounded in a V-shape during the session but fell again in late trading to end down 2.8% at $67.62 per barrel, while Brent crude closed down 2.32% at $72.31 per barrel.

The three major U.S. stock indexes collectively closed lower, with the Dow closing down 0.41%, the Nasdaq closing down 0.63% and the S&P 500 down 0.6%. The Nasdaq China Golden Dragon Index closed down 0.45%, Chinese e-commerce stocks were mixed, with Alibaba and Jingdong up more than 1% and Pinduoduo closing lower by 3.4%. Nvidia pulled back to close down more than 5%.     

European stocks fell hard across the board, Germany's DAX30 index closed down 1.54%; Britain's FTSE 100 index closed down 1.01%; Europe's Stoxx 50 index closed down 1.71%.

Market Focus

1. Fed-Jefferson hinted at a pause in rate hikes in June, Harker said to skip June, both members of the ticket stressed that the move could not be considered the end of rate hikes, and the two remarks sharply depressed the probability of a rate hike in June to 30%, a figure that had previously reached nearly 70 due to the U.S. job openings data greatly exceeding expectations. Mester: saw no reason to pause rate hikes. Bowman: The rebound in home prices may undermine efforts to fight inflation. Brown Book: The economy has shown signs of cooling in the past few weeks, with hiring and inflation both slowing modestly.

2. U.S. debt ceiling procedural vote passed, the House of Representatives opened the bill debate process, which is expected to vote on the full House this morning.

3. The Baltic Dry Index fell 146 points, or 13% on Wednesday to its lowest level since Feb. 27.

4. Former U.S. Vice President Mike Pence will reportedly announce his candidacy for the 2024 U.S. presidential election on June 7, with polls showing his approval rating below 4%.

5. The U.S. Federal Deposit Insurance Corporation (FDIC) placed four banks on its “Troubled Banks List,” which now includes 43 banks with total assets of $58 billion.

Geopolitical Situation

Food Situation

1. Hungary has asked the EU to extend restrictions on food imports from Ukraine until at least the end of the year, applying to at least five Eastern European countries.

2. According to foreign media reports, the recent and future dry weather will cut Ukraine's 2023/24 wheat production forecast by 7% to 20.7 million tons.

Geopolitical Situation

Institutional Perspective

01

Goldman Sachs

Goldman Sachs：Inflation data across the Eurozone is patchy

May 31 - Preliminary inflation data from Eurozone countries present mixed messages, with the headline reading looking a bit high in May but core inflation slightly lower than previously expected, Goldman Sachs economists said in a note. Published state CPI data suggest Germany's May harmonized inflation rate will come in at 6.6%, economists said, compared with earlier reports of 6.0% for France and 2.9% for Spain, which were lower than expected, and 8.1% for Italy, which was significantly higher than expected. While core inflation appears to have slowed in Germany and France in May, it rose markedly in Italy, the economists added. As a result, they raised their headline inflation forecast for the Eurozone to 6.11% from 6.04%, while slightly lowering their core inflation forecast.

02

SOCIETE GENERALE

The BOJ is expected to raise its target range for 10-year government bond yields by 50 basis points to 1% at its next meeting.

03

MUFG

MUFG：A deterioration in global economic conditions will keep the dollar well supported

May 31 - Speaking about expectations for the euro against the dollar, Mitsubishi UFJ economists said that while global growth optimism continues to fade, the market has also removed all bets that the Federal Reserve will cut interest rates by the end of this year. That is good news for continued dollar strength, and the dollar's gains look set to extend further in the near term. The current weak US April inflation reading is unlikely to change the Fed's expectations of a 25 BPS rate hike at the next two meetings, so the Bank does not see the current weak US inflation reading as a negative for the Euro. But a worsening global growth picture is clearly positive for the greenback, which should help keep the greenback well supported after Friday's nonfarm payrolls report as well.