MHMarkets：December 04 2023--Fundamental Reminder

TBD The BOJ holds its first long-term monetary policy review seminar

17:30 EUR Sentix Inventor Confidence（DEC）

22:00 ECB President Christine Lagarde speaks

23:00 USD Factory Orders MoM (OCT)

MHMarkets Market Overview

Review of Global Market Trend

On Friday, Mr. Powell's remarks failed to dissuade traders from betting on rate cuts next year, with yields on the 10-year Treasury down more than 10 basis points to close at 4.209%. The yield on the two-year Treasury note, which is more sensitive to the Fed's policy rate, fell even deeper to close at 4.542%. The dollar index gave up all of the day's gains to end down 0.309% at 103.2, snapping a three-week losing streak for the first time in five months.

Spot gold rose as high as $2,075, nearing a record high of $2,079.76, before closing up 1.73% at $2,070.9. Spot silver rebounded sharply after approaching the $25 mark and ended up 0.68% at $25.42 an ounce.

International crude oil fell to a two-week low and recorded its sixth consecutive negative week on investor doubts about the effect of voluntary Opec + production cuts and concerns about sluggish global manufacturing activity. WTI crude closed down 2.70% at $75.57 per barrel; Brent crude lost the $80 mark and ended down 1.6% at $79.1 a barrel.

U.S. stocks got December off to a flying start, with all three major indexes notching their fifth straight week of gains. Both the Dow and S&P 500 finished the year at record highs. At the close, the Dow was up 0.82% at 36,245.50; The S&P 500 gained 0.59% to 4,594.63; The Nasdaq rose 0.55% to 14,305.03.

Major European stock indexes all closed higher. Europe's Stoxx 50 index closed up 0.82%, Germany's DAX30 index gained 1.12% and Britain's FTSE 100 index gained 1.01%.

Market Focus

1. Fed Chairman Powell: Interest rates are “deep” in restrictive territory; Committed to keeping policy tight until inflation is on track for 2%; It is too early to speculate when policy will be eased; Be prepared to tighten monetary policy further if the time is right.

2. The ISM manufacturing PMI came in at 46.7, missing expectations and marking the 13th consecutive month below 50, the longest record in more than 20 years.

3. The Atlanta Fed GDPNow model sees fourth-quarter GDP growth at 1.2%, compared with 1.8% previously.

7, Canada's unemployment rate rose for the second month in a row, and the hawkish tone isn't expected to ease just yet.

8. Russia plans to export 2.83 million tonnes of diesel in December, up 28% year on year.

9. Petrobras CEO: Brazil will join Opec + as an observer and is expected to formally accept the invitation by June next year.

10. The U.S. House of Representatives voted to expel Rep. Juan Manuel Santos, becoming the sixth member in U.S. history to be expelled from the chamber.

Institutional Perspective

01

CICC

【CICC：Whether the Fed cuts rates sooner depends crucially on how much inflation slows】

Cicc believes that an important catalyst for the sharp rise in asset prices across the board in the US last week was Fed Governor Waller's comments on the conditions for interest rate cuts, which triggered market pricing in an early rate cut. From the perspective of scenario analysis, Waller's statement makes sense: if inflation were to slow sharply, real interest rates would not need to be so high under the Taylor rule of monetary policy. But the key question is whether inflation can slow substantially. Cicc believes there is uncertainty. More of the slowdown in U.S. inflation over the past year has come from supply recovery, such as repair of supply chains, higher labor-force participation and lower energy prices. It is unclear how much room these factors have left to repair and reduce subsequent inflation as much as they did over the past year. If the supply repair is marginally weaker, then given the same demand, inflation will be more resilient and interest rates will stay high for longer. Overall, CICC believes that the Fed may not cut rates early and the market may be too ahead of its time, but Waller's speech sends a signal that the Fed does not intend to tamp down the economy too much and hopes to guide a soft landing, which is conducive to boosting short-term risk appetite.

02

CITIC Securities

【CITIC Securities：Downward pressure on the US economy may gradually increase the replenishment cycle may wait until next year】

Citic Securities Research report pointed out that the global manufacturing PMI index (49.3) in November picked up month-on-month compared with October, showing the characteristics of “China adjustment, Europe downturn, the United States weakness, Southeast Asia cold, India bright, South Korea good”. Some major European countries continued to fall into the recession stage, Southeast Asian countries continued to cold, while India and South Korea bright economic performance. The US manufacturing PMI in November was unchanged from October (46.7), with significant declines in production and employment. The labor market cooled at a faster pace, and production contracted again amid weak demand and high inventories. Downward pressure on the US economy may gradually increase, and the replenishment cycle may wait until next year.

03

ING Economics

【ING Economics：The Fed will cut rates at least six times next year】

The U.S. economy is showing clear signs of decelerating, suggesting the Fed will cut rates at least six times in 2024, ING Economics said in a note published Thursday.

Currently, futures markets imply the Fed will cut rates by 125 basis points next year. For James Knightley, chief international economist at ING Economics, slowing inflation, a cooling labor market and a worsening outlook for consumer spending mean the Fed will need to cut rates more aggressively than markets expect. “Growth is moderating, inflation is cooling, the labor market is cooling, and that's what the Fed wants to see.” “Mr. Knightley said. ”This should confirm that there is no need for further Fed tightening, but the outlook is looking less and less promising. Mr. Knightley said the U.S. labor market has cooled significantly, and while weekly jobless claims remain solidly low, continuing claims are rising. Essentially, he notes, this sends the signal when businesses are reluctant to lay off workers, but they are also less willing to hire new workers. That is, more evidence that the labor market is cooling rather than collapsing.