MHMarkets：August 16, 2023 - Fundamental Reminder

☆10:00 NZD RBNZ Interest Rate Decision

Investors are widely expected to be on hold.

☆14:00 GBP Core Inflation Rate MoM (JUL) & GBP Retail Price Index MoM (JUL)

☆20:30 USD Housing Starts (JUL) & USD Building Permits (JUL)

☆22:30 USD EIA Crude Oil Stocks Change (AUG/11) & USD EIA Strategic Petroleum Reserve Stocks Change (AUG/11)

☆The following day at 2:00 USD FOMC Monetary Policy Meeting Minutes

Market Overview

Review of Global Market Trend

On Tuesday, after the release of the super-expected “horror data”, spot gold fell sharply to below the 1900 mark in the short term. Although the subsequent rebound and refresh the daily high, but the end of the day is still erased all the gains during the day, and finally closed down 0.31% at $1901.95 per ounce; spot silver trend is similar, and finally closed down 0.36% at $22.53 per ounce.

The U.S. dollar index lost the 103 mark and managed to reverse the decline in U.S. trading, eventually closing up 0.048% at 103.22. The 10-year Treasury yield rebounded in a V-shaped rally during the session, closing at 4.219%, which was the highest in nearly 10 months.

International crude oil was lower for the second consecutive session as economic data showed a cloudy outlook for demand recovery in Asia and warnings that Fitch may downgrade dozens of U.S. banks triggered risk aversion.WTI crude once pushed downward to approach the 80 mark and eventually closed down 1.61% at $81.06 per barrel, while Brent crude closed down 0.3% at $86.33 per barrel. Separately, European natural gas prices jumped 15% intraday as strike talks continued in Australia.

The three major U.S. stock indexes opened lower, with the Dow closing down 1.01%, the Nasdaq closing down 1.1%, and the S&P 500 closing down 1.1%. The Nasdaq China Golden Dragon Index closed down 1.9% and Azera Motors fell more than 5%. Vietnam's electric car maker VinFast closed up more than 254%, surging to a market capitalization of $86 billion, making it the world's fifth-largest auto stock.

Most of the major European stock indexes closed lower, with Germany's DAX30 closing down 0.86%, Britain's FTSE 100 closing down 1.57% and Europe's Stoxx 50 closing down 0.96%.

Market Focus

1. Japan increased its holdings of U.S. debt by $8.8 billion in June, while China reduced its holdings by $11.3 billion.

2. Argentina's agriculture minister denied reports of a 15-day suspension of beef exports.

3. European gas prices jumped 15 percent as strike talks continued in Australia.

4. Fitch warned it may downgrade dozens of U.S. banks, including JPMorgan Chase.

5. the Atlanta Fed's GDPNow model expects U.S. GDP to grow at a rate of 5.0% in Q3, compared to the previous estimate of 4.1%.

6. The world's largest sovereign wealth fund, the Norwegian Pension Fund, raked in $142.6 billion in the first half of the year, a return of 10%.

7. Fed's Kashkari: not ready to say rate hikes are over, inflation has made some progress, but perhaps still need to raise rates.

8. U.S. retail sales data in July grew more than expected, achieving four consecutive months of growth. On the back of the data, gold prices fell below the 1900 mark and US bond yields spiked.

9. Vietnam's electric car maker VinFast Auto closed up 254% on the first day of its shell listing, with a total market capitalization of more than $86 billion ($800 million outstanding), becoming the world's fifth-largest auto stock.

10. The Russian Central Bank held an emergency interest rate meeting, raising rates to 12% from 8.5% and signaling that it could raise key rates further if inflation risks increase. Sources say Russia discusses reinstating capital controls to curb ruble depreciation.

Geopolitical Situation

Conflict Situation   

1. Russian missiles struck Lviv and Lutsk during the night.

2. Russian Defense Minister Sergei Shoigu: Russia will strengthen its military deployment and activities in the Nordic region to ensure its defense capabilities and strategic interests.

3. Interfax: The Russian Defense Ministry said that Russia attacked important Ukrainian military facilities last night.

4. The General staff of the Ukrainian armed forces said Ukraine had achieved “partial success” near the village of Robotyne in the region. An attempt by Russian forces to recover lost ground near the village of Urozhaine in the eastern region of Donetsk has failed.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs：：The ruble will weaken despite the Russian central bank's interest rate hike】

August 15- The Russian ruble will continue to depreciate unless oil prices rise, despite Russia's central bank raising its policy rate at an emergency meeting on Tuesday, Goldman Sachs said. Clemens Grafe, an economist at Goldman Sachs, said the ruble was not undervalued as the real effective exchange rate in July was still about 10% higher than in the fourth quarter of 2021. Goldman economists cast doubt on Russia's ability to fund its current account deficit given the sanctions imposed by Western countries, and they don't think the ECB will be willing to dip into its reserves to do so. Therefore, the current account balance is actually a constraint on the economy, which will lead to large fluctuations in the ruble. Moreover, the transmission of interest rate increases to the ruble is likely to be slow due to sanctions.

02

SOCIETE GENERALE

Societe Generale: The US core CPI is expected to have increased 0.3% month-over-month. A level of 0.4% or higher would signal chaos

August 10 - We expect the US core CPI to rise 0.3% month-over-month in July, up from 0.2% in June, Societe Generale economists said. That's not a disaster, but it's not ideal, and it's not what a data-dependent Fed wants. That could help yields recoup ground lost earlier in the week amid heightened risk aversion. Month-on-month growth of 0.4% or more could signal chaos, including a hawkish repricing of the Fed, a sell-off in US Treasuries (and Bunds), swap payments, risk aversion in equities/credit/high beta FX, and dollar strength. A monthly rate of 0.2% or less would be a Goldilocks scenario: risk appetite in equity and currency markets, and a bullish flattening in 2-year / 10-year Treasuries.

03

MUFG

MUFG：The pound could still strengthen further

August 14 - After last week's U.S. inflation data, this week will see U.K. inflation data, wages and employment data and retail sales data, MUFG economists said. This week's UK data may not provide enough evidence that upside risks to inflation have eased somewhat to prevent the BOE from going ahead with a rate hike in September, in which case it is likely to see scope for further GBP strength following stronger GDP figures. However, with the US Dollar looking like it's also struggling to find solid levels, shorting EURGBP may be a better way to get the pound up.