MHMarkets：October 13, 2023--Fundamental Reminder

09:30 CNY Inflation Rate YoY (SEP)

10:00 CNY Trade Balance (SEP)

21:00 Fed President Harker speaks on the economic outlook & ECB President Christine Lagarde speaks.

22:00 USD 1 Year Inflation Expectations (OCT) & USD Michigan Consumer Sentiment Flash (OCT)

The next day at 01:00 USD Baker Hughes Total Rig Count (OCT/13)

Market Overview

Review of Global Market Trend

The dollar index rose higher and returned above the 106 mark to close up 0.86% at 106.59 after Thursday's unexpected pickup in CPI data reinforced market expectations of a “higher for longer” Fed and one more rate hike this year.

In addition to rising on the better-than-expected CPI, yields rose rapidly after a particularly dismal auction of 30-year bonds released by the Treasury, with the 10-year yield rising more than 20 basis points to close near 4.7%. The yield on the two-year Treasury note rose almost 10 basis points, back above the 5% mark, to close at 5.07%.

Spot gold, weighed down by higher dollar and Treasury yields, snapped a four-day winning streak to end down 0.28% at $1,868.83 an ounce. Spot silver settled down 0.93% at $21.82 an ounce.

Crude oil rose more than 2%, but at one point erased all of the day's gains as the dollar rose, before recovering. WTI crude ended up 0.28% at $83.47 a barrel, while Brent crude rose 0.71% to $85.68 a barrel.

U.S. stocks came under pressure, with the Dow down 0.51%, the Nasdaq down 0.63% and the S&P 500 down 0.63%, after a poor 30-year Treasury bond auction and fears of higher interest rates returned to the market. The Nasdaq China Golden Dragon Index fell 3.4%, with JD.com closing down more than 8%, Alibaba down 3.7% and NIO down nearly 6%. Apple, Amazon and Nvidia closed up 0.5%.

Market Focus

1、Australia may add iron ore and other minerals to its “critical minerals list”.

2. Argentina's central bank raised its benchmark interest rate to 133% from 118%.

3. Ford: Concessions to the autoworkers have reached their limits.

4. Russian Deputy Prime Minister Novak: If necessary, fuel export restrictions will be further eased. Global oil demand is set to rise by 2.4 million barrels a day this year.

5. Fed's Collins: Yields rise or decrease the need for rate hikes; Further tightening cannot be ruled out, and September CPI data suggest it will take time for prices to return to stability.

6. Opec Monthly Report: Maintaining its forecast for global oil demand growth this year and next, Opec crude oil production increased by 273,000 barrels a day in September to 27.75 million barrels a day.

7. The International Energy Agency on Thursday lowered its forecast for oil demand growth in 2024, arguing that tough global economic conditions and improved energy efficiency will weigh on oil consumption.

8. The overall CPI in September slightly exceeded expectations, and interest rate hike expectations have increased.

9. 30-year bond auctions were poor. The Treasury Department auctioned $20 billion of 30-year bonds at 4.837% with a bid ratio of 2.35. (Pre-issue transaction rate at 4.80%, last month bid multiple at 2.46)

11. EIA crude oil inventories rose by 10.176 million barrels in the week ended October 6, exceeding the expected 492,000 barrels and recording the largest increase since the week ended February 10, 2023.

12. U.S. President Joe Biden: Welcomed the latest inflation data and will continue to work to build the economy from all aspects.

Institutional Perspective

01

Citibank

【Citibank: We're looking at consumers with low FICO scores, there's a problem there.】

Consumers and businesses may be more likely to miss loan payments if they are in worse financial distress. Banks have begun setting aside a certain amount to cover loan losses, which they expect to intensify but not surge.

One area to watch is commercial real estate. Office buildings have not filled up since the pandemic, raising the risk of defaults on loans tied to them. In the second quarter, Wells Fargo set aside more money for losses in the sector, while Goldman Sachs wrote down some of its real-estate investments.

02

Morgan Stanley

【Morgan Stanley: Interest rates are likely to remain high for the foreseeable future】

Today's slightly hotter-than-expected CPI and tepid weekly jobless claims didn't have an impact on the outlook for inflation or interest rates. The Fed may decide to leave interest rates unchanged at its November meeting, but they are likely to remain elevated for the foreseeable future.

03

Bank of America

【Bank of America：In the biggest bear market in history, why are investors still buying bond funds？】

Investors are buying U.S. bond funds despite the biggest bear market in U.S. bond history, according to a Bank of America report. Specifically, the iShares 20+ year Treasury Bond ETF is down 47% from its 2020 peak, worse than the 1981 bond bear market and on par with some of the worst market crashes in history.

A combination of rising inflation, a more resilient economy, and rapidly rising interest rates sent bond yields soaring and bond prices tumbling, with losses accelerating after the Fed began raising rates in March 2022.