Mai hui MHmarkets: July 11, 2023 - Fundamental Reminder

☆ At 23:00 Beijing time, FOMC Permanent Voting Committee, FRBNY President William Williams hosts a discussion organized by the Economic Club of New York.

☆The next day at 0 a.m., the EIA releases its monthly short-term energy outlook.

Market Overview

Review of Global Market Trend

Spot gold was little changed on Monday as traders remained cautious ahead of key CPI data, falling sharply to an intraday low of 1,912.74 before quickly recovering losses to end the day up 0.02% at $1,925.32 an ounce. Spot silver moved similarly, ending up 0.28% at $23.13 an ounce.

The dollar index lost 102 for the first time since June 22 and was last at 101.97. The 10-year Treasury yield fell sharply in the US market, ending just shy of the 4% mark.

Brent oil retreated from nine-week highs, as markets weighed August supply cuts by Saudi Arabia and Russia against weaker global demand prospects. WTI crude was last down 0.48% at $73.17 a barrel, ending a four-day winning streak. Brent crude settled down 0.52% at $77.75 a barrel. Benchmark European natural gas futures fell below the psychological round mark of 30 euros a megawatt-hour for the first time since June 13.

The three major U.S. stock indexes fluctuated slightly throughout the day, with the Dow Jones Industrial Average closing up 0.62%, while the S&P 500 and Nasdaq both closed up slightly. The Nasdaq China Golden Dragon Index closed up 1.2%, with NIO jumping about 8% to lead Chinese stocks. Cryptocurrency stocks broadly closed higher, with MicroStrategy up 7% and Coinbase up 3%.

Major European stock indexes were all in the red, with Germany's DAX30 up 0.45%, Britain's FTSE 100 up 0.23% and the Euro Stoxx 50 up 0.47%.

Market Focus

1. Turkey agreed to move forward with Sweden's bid to join NATO.

2. U.S. cancer drug shortage FDA allows Increased imports from China.

3. Press Secretary of the Russian President: Putin met with Prigozhin after the Wagner incident.

4. Dutch Prime Minister Mark Rutte announced his retirement from politics after a no-confidence vote, saying he was “no longer party leader”.

5. Russia's energy ministry and antitrust agency will decide on export quotas for oil products by August 3, sources said.

6. In a preliminary vote, the Knesset passed a controversial bill that curbs some of the Supreme Court's powers.

7. Agency data: Breaking ChatGPT's record for fastest growth, Meta's new Threads software added 100 million users in five days.

8. Fed - Bostic reiterates: Does not need to raise rates again to see inflation return to 2%. Mester: Could have raised rates in June, but understands the pause, rate forecast is equal to or slightly higher than the median of the June dot plot. Vice Chairman of Financial Supervision Barr: Rates are close to restrictive, but inflation is still too high. Has decided to strengthen financial buffers for big banks. Daly: A few more rate hikes are needed. There are three potential reasons for the non-slowdown: lagging policy impact, weak policy transmission mechanism and large underlying momentum in the economy. FRBNY survey: inflation expectations over the next year fell to 3.8%. 

Geopolitical Situation

Conflict Situation

1. Russian Defense Ministry: Ukraine unsuccessfully tried to attack Crimea, Rostov and Kaluga regions on Sunday.

2. Advisor to ukrainian interior minister: russian deputy head of the mobilization department of the krasnodar region stanislav rzhytskiy was shot. According to the Russian media, Rzhytskiy was the former commander of the Krasnodar submarine, who had ordered the launching of Caliber missiles into Ukraine.

3. Russian Defense Ministry: Chief of the General Staff of the Russian Armed Forces Gerasimov heard a report on the destruction of four Ukrainian ballistic targets on July 9.

4. Head of Ukrainian Military Intelligence stated that Wagnerian mercenaries had reached the Russian nuclear base. Western officials have repeatedly stated that Russia's nuclear stockpile was never threatened during the Wagner incident.

Energy Situation

1. Interfax: Russia's energy ministry and antimonopoly agency will decide on export quotas for oil products by August 3, sources said.

2. TASS: Senior diplomats from Russia and the Gulf states agreed to work together to develop the energy supply chain, a joint statement showed.  

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: The BOE is now expected to make a 25 basis point rate hike in November and has raised its terminal rate forecast to 6% versus its previous forecast of 5.75%.

02

SOCIETE GENERALE

【Societe Generale: For EURUSD to return above 1.10, the U.S. monthly rate of CPI may need to drop to 0.2%】

July 10--This week's focus will be on Wednesday's RBNZ and the BOC interest rate resolutions, as well as the U.S. CPI report due the same day. Kit Juckes, Chief Global FX Strategist at Societe Generale, noted that we expect both headline and core CPI in the U.S. to rise by 0.3% month-on-month, but for EURUSD to have a chance of getting back above 1.10, we'd probably need to see inflation figures of 0.2% (preferably core), along with a run towards 140 for USDJPY. In addition, the market expects the BOC to raise rates by 25 bps to 5% and the RBNZ to leave rates unchanged at 5.5% and the promise that the latter has ended its rate hiking cycle could be enough to send the NZD/CAD again.

03

MUFG

【Japan's 10-year bond yield rose to a 10-week high, and the BOJ may take action this month】

July 10 -- The yield on Japan's 10-year government bonds rose 2.5 basis points to 0.46% today, which was the highest level since April 28th. Data released on Friday showed that Japanese payrolls are growing at the fastest pace in nearly 30 years, which may prompt the BOJ to take action at its July 27-28 meeting. BOJ Governor Kazuo Ueda, who has been dovish in his message to the market, said at a European Central Bank forum last month that if the BOJ is “reasonably certain” that inflation will accelerate through 2024, the central bank will have good reason to change monetary policy. MUFG Morgan Stanley Securities senior market economist Naomi Muguruma said: “It is unclear what the BOJ will wait before deciding to adjust the YCC. It seems that the most important factor is the BOJ's confidence in future price movements, but this is vague and we cannot quantify their level of confidence.” Muguruma expects the BOJ to wait until October to raise the 10-year Treasury yield cap.