Mai hui MHmarkets: June 30, 2023 - Fundamental Reminder

☆17:00 EUR CPI (JUN)

This data is expected to slow to 5.6% year-on-year from 6.1% in the previous month, but pick up steam month-on-month from 0% to 0.03%.

☆20:30 USD Core PCE Prices Index (MAY)

This data currently expected to show a 4.70% yoy increase, in line with the previous month, but a slower 0.3% month-on-month increase.

☆21:45 USD Chicago PMI(JUN)

Market Overview 

Review of Global Market Trend

On Thursday, on the back of a series of strong U.S. economic data, spot gold briefly fell nearly $20 in premarket trading, briefly falling below the 1,900 mark for the first time since mid-March, before strongly recovering all losses to end up 0.04 percent at $1,908.15 an ounce. Spot silver settled down 0.58 percent at $22.56 an ounce.

The dollar index fell and then rose, reaching an intraday high of 103.45 before settling above 103 and closing up 0.37 per cent at 103.35. Treasury yields rose sharply, with the two-year yield flirting with the 4.9 per cent mark before closing at 4.863 per cent. The yield on the 10-year Treasury note closed at 3.842%. The yield on five-year Treasury inflation-protected securities (TIPS) rose above 2% for the first time since 2008.

International crude oil rose, with WTI crude hitting the $70 mark several times during the day without success. It rose to an intraday high of $70.65 in the U.S. session before giving up some gains to end up 0.9% at $69.74 a barrel. Brent crude settled up 0.69% at $74.30 a barrel.

U.S. stocks were divided, with the Dow Jones Industrial Average up 0.80 percent and the S&P 500 up 0.45 percent, while the Nasdaq, which mainly represents growth stocks, closed flat on the back of stronger expectations for a Fed rate hike. The Nasdaq China Golden Dragon Index closed down 1.5%, Virgin Galactic, which successfully achieved commercial space flight, fell nearly 11%, and Apple edged up to within $20 billion of a $3 trillion market cap.

European shares were mixed, with Germany's DAX30 index closing down 0.01%. Britain's FTSE 100 closed down 0.38%; The Stoxx Europe 50 index closed up 0.23%.

Market Focus

1. US Q1 GDP growth was revised sharply higher to 2%, forcing markets to signal target pricing for two more rate hikes this year to the Fed. As of this morning, markets were pricing in at most another rise of about 35BP this year, compared with about 30BP yesterday.

2. Argentina's central bank is said to have approved the opening of RMB bank accounts.

3. Ethiopia formally applied to join the BRICS cooperation mechanism.

4. Japan and South Korea resumed a currency swap deal worth $10 billion in the first round.

5. CME Group will launch Ethereum/Bitcoin ratio futures on July 31.

6. Will Aspartame be classified as a possible carcinogen？ WHO: Will respond on 14 July.

7. The U.S. Special envoy to Iran has been put on leave for a security clearance review, which could hinder the resumption of talks between the U.S. and Iran.

8. Vietnam's imports and exports both fell by double digits in June, recording -16.9 per cent and -11.4 per cent year-on-year respectively.

9. The Israeli prime minister is said to have revived his plan for judicial reform, in which the most controversial parts have been stripped out.

10. Federal Reserve - Powell: Do not rule out the possibility of consecutive interest rate hikes, the risk of doing too much is less than doing too little, next year vote committee Bostic: Do not rule out the need for further interest rate hikes, there is a probability of two consecutive interest rate hikes, do not see the urgency of interest rate hikes as Powell sees. The baseline is no more rate hikes but no rate cuts in 2024.

Geopolitical Situation

Wagner Affair

1. U.S. Defense Department spokesman Ryder: There are still some members of the Wagner Group in Ukraine.

2. RIA Novosti quoted senior Russian lawmakers as saying that Russian Wagner Group founder Prigozhin refused to sign a contract and was told that his fighters would stay out of the Ukraine conflict.

3. Doubtful ties to the head of Wagner and Russian General Surovikin are being held under investigation.

Other Situation

1. The U.S. ambassador to NATO said Thursday that NATO members are nearing a compromise on Ukraine's membership aspirations, which could determine how Kiev will join the alliance.

2. According to the Financial Times: The EU plans to offer Ukraine a future security commitment.

3. According to the Financial Times: The Danish side said that the EU should not lower its standards to admit Ukraine.

4. According to the Wall Street Journal: Israeli Prime Minister Benjamin Netanyahu said that Israel cannot allow the United States to provide Ukraine with the Iron Dome air defense system developed jointly with the United States. Concerns about its growing military ties with Iran have been conveyed to Russia.

5. Putin: All travel procedures for foreigners to Russia should be easy.

6. According to NBC News: Former U.S. Vice President Mike Pence met with Ukrainian President Zelensky during his visit to Kiev.

7. According to Ukrainian public television: the head of the General Intelligence Service of Ukraine Budanov said that Russian Wagner mercenaries will no longer fight in Ukraine. Currently, Wagner mercenaries are also not involved in hostilities against Ukraine.

8. Russian President Vladimir Putin: Russia's GDP grew 5.4% year-on-year in May.

9. Hungarian opposition lawmakers: The House Committee of the Hungarian Parliament rejected a proposal to vote on Sweden's NATO membership next week.

10. Russia's fertilizer production rose 6% in May from a year earlier.

11. According to the Wall Street Journal: the United States is about to approve the supply of long-range ATACMS missiles to Ukraine to enhance its combat capabilities.

12. Ukrainian President Zelensky: Spanish Prime Minister Sanchez will visit Kiev on July 1.

13. IMF Managing Director Georgieva: Ukrainian authorities can immediately withdraw $890 million as budget support. The approval of this loan will allow Ukraine to draw down $3.6 billion of the current $15.6 billion program so far.

14. The Russian Defense Ministry said that two Ukrainian generals and up to 50 officers were killed in the attack on Kramatorsk. (RIA Novosti)

15. According to Interfax: Russia has increased its grain export quota for 2023 by 814,000 tons.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs: Brazil's central bank may cut interest rates as early as August】

On June 29, Goldman Sachs economist Alberto Ramos said in a research note that the tone reflected in Brazil's central bank's quarterly inflation report is consistent with what the rate-cutting cycle calls for, meaning the central bank could cut rates for the first time as early as its next monetary policy meeting in August. Brazil's central bank also raised its economic growth forecast for the year to 2.0% from 1.2%, boosted by an improved outlook for the country's industries, particularly mining and utilities, as well as services, Ramos said.

02

SOCIETE GENERALE

Societe Generale chairman: European banks have been resilient during the rate hike. Inflation problems put the credibility of central banks at risk.

03

MUFG

Mitsubishi UFJ analyst Derek: The news that the now debt-ridden Thames Water may be under government control is a clear example that the impact of the rate hike is spreading and exacerbating a predicament that has existed for some time.