MHMarkets：September 26, 2023--Fundamental Reminder

☆21:00 USD FHFA House Price Index MoM (JUL) & USD S&P/CS Composite-20 HPI YoY (JUL)

22:00 USD New Home Sales (AUG) & USD CB Consumer Confidence (SEP)

☆TBD The US House of Representatives has voted on a stopgap funding bill.

Market Overview

Review of Global Market Trend

The dollar index surged Monday, topping 106 for the first time since Nov. 30, after comments from Fed officials reinforced expectations that U.S. interest rates will stay high for a long time, before paring gains in late trading to end up 0.341% at 105.96. The yield on the 10-year Treasury note rose more than 10 basis points during the day, again hitting its highest level since October 2007, before closing at 4.539%.

Dragged down by the strength of the dollar and Treasury yields, spot gold fell sharply in the early days of the U.S. session, falling more than $10 from the daily high, before settling down 0.46% at $1,915.93 an ounce. Spot silver moved similarly, falling towards the 23 mark before settling down 1.79% at $23.13 an ounce.

Oil's rally cooled as investors waited for fresh catalysts to support more buying and Russia eased a ban on fuel exports. WTI crude lost the 90 mark and ended down 0.49% at $89.85 a barrel; Brent crude settled down 0.34% at $91.88 a barrel.

The three major U.S. stock indexes closed higher throughout the day, with the Dow Jones Industrial Average up 0.13%, the Nasdaq up 0.45% and the S&P 500 up 0.4%. The Nasdaq China Golden Dragon Index closed down 1.1%, with Li Auto falling nearly 10% and NIo paring losses to close down 2.2%. Faraday Future tumbled more than 24%, leaving it with a total market value of just $55 million, a record low.

Major European stock indexes closed down collectively, with the Stoxx Europe 50 down 0.95%, Germany's DAX30 down 0.98%, France's CAC40 down 0.85% and Britain's FTSE 100 down 0.78%.

Market Focus

1. Moody's warns that the shutdown will have a negative impact on the US credit rating.

2. Russia plans to adjust the export ban on gasoline and diesel: it wants to exempt bunker fuel.

3. Amazon will invest up to $4 billion in AI startup Anthropic.

4. Fed's Goolsbee: 'It feels like' interest rates will stay high for longer than markets expect

5. North Korea has announced that foreigners will be allowed to enter the country from September 25, subject to a 2-day medical quarantine.

6. Uaw source: Labor contract talks with Ford 'very active', still work to be done

7. European and American long bond yields rose across the board, with US bonds up 10BP in 10y days and the spread with 2y narrowing to about 60BP; The index rose to its highest level for the year.   

Geopolitical Situation

Conflict Situation

1. Ukrainian air Force: shot down 22 attacking drones and 11 cruise missiles launched by Russia during overnight stay.

2. Russian Defense Ministry: Destroyed several Ukrainian-launched drones in the Black Sea and Crimea.

3. Governor of Russia's Kursk Region: Ukrainian drone strikes in the Kursk region damaged residential and administrative buildings.

4. Russian President Vladimir Putin asked Defense Minister Sergei Shoigu to stop a Ukrainian counteroffensive by October in order to improve the situation on the front lines, according to Ukrainian Pravda: The Institute for Conflict Studies (ISW), a US think tank, citing insider sources.

5. The Russian Defense Ministry said on Monday that Russian forces had struck temporary camps for foreign mercenaries and training bases for armed saboteurs in Ukraine over the past 24 hours. The General staff of the Ukrainian armed forces released a war report on the same day, saying that in the past 24 hours, there have been 17 battles in the front-line areas.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs：Higher oil prices are unlikely to prompt the Fed to tighten monetary policy】

Higher energy prices are unlikely to lead to lower U.S. consumer spending and GDP, Goldman Sachs economists said in a report. Oil prices rose less than in previous rallies, and higher investment in the energy sector should offset the negative impact of higher costs. The impact on inflation could lead to higher interest rates, dampening economic growth, but the Goldman economists said they “do not expect the recent oil price action to unanchor inflation expectations and force a policy response from the Fed.”

02

SOCIETE GENERALE

【SOCIETE GENERALE：A rate hike will not be enough to prevent GBP/USD from losing 1.20 in due course】

Sep 21 – Societe generale chief global FX strategist Kit Juckes said a 25 basis point rate hike by the BOE is justified as weak inflation is not enough to offset strong wage growth and tightness in the Labour market. If the BOE does raise rates, the GBP slide may get some relief, but not enough to prevent GBP/USD from falling below 1.20 in due course.

03

MUFG

MUFG：The BOJ is not expected to change its policy stance. Attention will turn to comments from Mr Ueda about the timing of future interest rate rises and the extent of his discomfort with the yen's recent weakness.