Mai hui MHmarkets: July 13, 2023 - Fundamental Reminder

☆ At 16:00 Beijing time, IEA will release its monthly crude oil market report. Opec releases its monthly crude oil market report, the specific time to be determined, usually around 18-21 o 'clock Beijing time.

☆At 19:30, the minutes of the ECB's June monetary policy meeting will be released.

☆ At 20:30, the U.S. will release Initial Jobless Claims(JUL/08), and PPI YoY&MoM (JUN).

☆The next day at 6:45, Fed Governor Waller speaks on the economic outlook.

Market Overview

Review of Global Market Trend

On Wednesday, signs of cooling US inflation boosted hopes that the Federal Reserve may end its rate hike cycle sooner than previously expected. Spot gold rose more than $20 to near the $1,960 mark after the CPI data was released, winning four straight daily gains before closing up 1.32% at $1,957.46 an ounce, a near one-month high. Spot silver stood at $24 and ended up 4.43% at $24.13 an ounce.

The dollar index fell below the 101 mark and ended down 1.052 %at 100.6, its lowest level in nearly three months. The yield on the 10-year Treasury note fell more than 12 basis points to close at 3.863%. Non-us currencies rose broadly, with the offshore yuan breaking through the 7.17 mark against the dollar, up nearly 400 points on the day. EUR/USD stood above 1.11 for the first time since March 2022. The dollar fell to a six-week low against the yen.

WTI crude oil ended up 1.38% at $75.78 a barrel as fears that higher interest rates would slow economic growth and dampen oil demand eased and as both the EIA and IEA forecast a tighter oil market in 2024. Brent crude settled up 1.05% at $80.11 a barrel, closing above $80 for the first time since April.

The three major U.S. stock indexes closed higher, with the S&P 500 up 0.75% and the Nasdaq up 1.1%, both hitting 15-month closing highs, and the Dow Jones Industrial Average up 0.26%. The Nasdaq China Golden Dragon Index jumped 3.3 per cent, rechallenging its June high, as iQIYI closed up 9 per cent, Bilibili 7.7 per cent and PDD 6 per cent.

Major European stock indexes were all in the red, with Germany's DAX30 up 1.47%, Britain's FTSE 100 up 1.83% and the Euro Stoxx 50 up 1.72%.

Market Focus

1. US CPI came in at 3.0% YoY in June, while core CPI returned to the “4” at 4.8%, both below expectations. Falling inflation cooled interest rate hike expectations, with U.S. stocks closing at a 15-month high, gold surging, U.S. Treasuries down more than 12BP and the index down more than 1%.

2. The effect of sanctions weakened, and Russian oil prices exceeded the G7 ceiling for the first time.

3. Musk announced the formation of X.AI, an artificial intelligence company with the goal of understanding the “true nature of the universe.”

4. Peru has extended a state of emergency on major roads. The 30-day state of emergency covers the country's main mining corridors.

5. The RBNZ paused rate hikes, following 12 consecutive hikes since August 2021.

6. The SEC issued new rules aimed at bank runs in the early days of the pandemic, but they did not include Swing Pricing.

7. The BOC raised interest rates by 25 basis points as scheduled, predicting CPI will return to its 2% target in mid-2025. Governor Macklem said he was prepared to raise rates again if needed.

8. Fed - Kashkari: Entrenched inflation may force further rate hikes. Banks need to prepare for that. The threshold for adjusting the pace of balance sheet contraction is high. Balking: inflation is still too high, if future data does not confirm that inflation will return to the target level, will be willing to take more policy measures. Beige Book: Overall economic activity in the United States has increased slightly since late May, and overall economic expectations are expected to continue to grow slowly in the coming months.

Geopolitical Situation

Conflict Situation

1. Zelensky says he hopes Ukraine will win the Russian-Ukrainian conflict before the 2024 Nato summit in Washington.

2. Tass: Russian air defenses shoot down u.s.-made HARM missile fired by Ukrainian army in Donetsk.

3. Ukraine's military says air defense forces engaged drones on the outskirts of Kiev for the third night in a row. Explosions were also heard in other parts of Ukraine, including south of Mykolayiv, west of Khmelnytskyi, possibly air defense fire.

4. Russian Ministry of Defense: Russian forces repelled a number of UAF offensives in the directions of Kupyansk, Hongriman, Donetsk, Zaporizhzhya, and Kherson, striking UAF munitions depots and other targets, and shooting down UAF Mi-24 helicopters. Russian air defenses intercepted several Storm Shadow cruise missiles and drones of the Ukrainian Army.

5. The General Staff of the Ukrainian Armed Forces: The UAF struck Russian command posts, air defense missile systems, electronic warfare systems and other targets, and carried out a number of air strikes against Russian positions.

Assistance Situation

1. U.S. President Joe Biden: Ukraine will not join NATO for the time being. Ukraine has a shortage of artillery ammunition, we are solving this problem.

2. White House official: the United States will soon start negotiations with Ukraine on long-term security assistance.

3. Zelensky: Australia agreed to provide new defense assistance to Ukraine, including 30 viper armored vehicles; agreement with Germany on additional patriot air defense launch systems and missiles.

4. NATO Secretary General Jens Stoltenberg: training of F-16s will begin this summer.

5. The G7 announced a multilateral framework to explicitly support Ukraine in defending its sovereignty and territorial integrity. The framework focuses on ensuring that Ukraine has sustainable defenses now and deterring Russian actions in the future. Technical and financial support will be provided for Ukraine's urgent needs.

6. The press service of the Romanian Ministry of Defense said that Romania will train Ukrainian pilots to operate F-16s together with NATO allies.

7. Zelensky said that the issue of providing Ukraine with long-range Army Tactical Missile Systems (ATACMS) was discussed with U.S. officials, but no decision has been made on the issue.

8. Norway will provide Ukraine with the Norwegian Advanced Surface-to-Air Missile System (NASAMS) air defense support package, including two launch units, two fire control centers and spare parts.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: Upgraded Sony to “Buy”, and the company's stock is on the Conviction Buy list.

02

SOCIETE GENERALE

Societe Generale: For EURUSD to move back above 1.10, the USD CPI MoM may need to fall to 0.2%.

03

MUFG

MUFG: Non-farm payrolls data won't make Fed more hawkish in the second half of the year.