MHMarkets:December 28, 2023,--Fundamental Reminder

21:30 USD Initial Jobless Claims (DEC/23)

The market expects it to record 210,000 people.

23:00 USD Pending Home Sales MoM (NOV)

The next day at 00:00 USD EIA Crude Oil Stocks Change (DEC/22)

The market expects it to decrease by 2.6 million barrels.

Market Overview

Review of Global Market Trend

On Wednesday, the dollar index in the US trading session accelerated downward, and fell below the 101 mark, hit a new low in July this year, and ultimately closed down 0.6% at 100.94; US bond yields plummeted, 10-year US bond yields fell below the 3.8% mark, and ultimately closed at 3.789%; on the Fed's policy rate is more sensitive to the yield of two-year U.S. bonds closed at 4.240%.

Spot gold continued to rise momentum, it was in the US trading session broke through the 2080 barrier, and rose to $2084.49 of intraday highs, hitting a nearly three-week high, but failed to stabilize above the 2080 barrier, and ultimately closed up 0.47% at $2077.07 per ounce; spot silver closed up 0.18% at $24.27 per ounce.

Two oils, WTI Crude and Brent Crude, nearly wiped out yesterday's gains on the impending return of global shipping companies to the Red Sea. WTI Crude fell sharply since the European session, losing $75 and at one point dropping to an intraday low of $73.78, and eventually closing down 2% at $73.78 per barrel, while Brent Crude failed to hold above the $80 mark, and eventually closed down 1.72% at $79.24 per barrel.

Major US stock indexes closed slightly higher, with the Dow closing up 0.3%, the S&P 500 closing up 0.14%, and the Nasdaq closing up 0.16%. Digital currency concept stocks led the market, MSTR.O closed up more than 11% and COIN.O rose 7.6%. Top Chinese stocks were mixed, with NTES.O closing down 4.9%, LI.O closing up 3.7%, and BABA.N and JD.O closing slightly higher.

European stocks closed higher across the board, with Europe's Stoxx 50 closing up 0.15%, Germany's DAX 30 closing up 0.21% and Britain's FTSE 100 closing up 0.36%.

Market Focus

1. Despite the continuing complexity of the situation in the Red Sea, Maersk arranged for dozens of ships to pass through the Suez Canal, and international oil prices fell on the news. France's Duffy Line also said it was resuming its Red Sea route following the deployment of a multinational task force in the region. Hapag-Lloyd, for its part, intends to continue its detour around the Cape of Good Hope and conduct its next review on Friday.

2. US employers expect to hire less in 2024, a trend expected to restrain wage growth and moderate inflationary pressures, according to a survey by several regional Federal Reserve banks, including New York and Dallas. The data show that the Fed's measures to slow growth and curb inflation are affecting the economy, a result that implies a slowdown in employment but not an outright contraction.

3. Iran and Russia agreed to use their national currencies instead of the US dollar for transactions.

4. Iraqi Ministry of Energy: Iraq agrees to jointly develop oil fields with Iran.

5. US API crude oil stockpiles increased by 1.837 million barrels in the week to Dec. 22, greatly exceeding the expected decrease of 2.6 million barrels.

6. BOJ Governor Kazuo Ueda said there is no rush to tighten ultra-loose monetary policy because the risk of “inflation well above 2% and accelerating” is small, but the possibility of ending negative interest rates next year is not zero.

7. Bank of Japan: BOJ will cut the amount of regular bond-buying operations in the January-March quarter.

Institutional Perspective

01

UBS

【UBS: Preparing for the “waist cut interest rate cut”】

UBS predicts that the recession in the middle of 2024 will prompt the Fed to begin to relax monetary policy, “cut rates”. In November of this year on the basis of a similar preview, UBS reiterated that the Fed is expected to cut interest rates by 275 basis points to deal with declining inflation and recession. According to CME's Fedwatch tool, this is nearly four times the 75 basis point rate cut currently expected by the market. The bank wrote in its report, “A key feature of UBS's forecast is that starting in March 2024, the Fed's easing cycle will be very pronounced. We expect rates to fall to 1.25% by the first half of 2025.” UBS adds that the Fed's interest rate cut will be a response to the forecast of an economic recession in the US from the second quarter to the third quarter of 2024, as well as a sustained slowdown in overall and core inflation.

02

Credit Agricole Securities

【Credit Agricole Securities: BOJ is likely to stick to its current stance】

Arata Oto, Japan market economist and macro strategist at Credit Agricole Securities (Asia), is more conservative. The BOJ's monetary policy normalization process may have to wait until 2025. “BOJ is likely to stick to its current stance that the multiple adjustments to the YCC are meant to reinforce the long-term nature of the current easing policy, rather than to prepare for an exit from the current easing monetary framework.”

03

MUFG

【MUFG: Interest rate hike from -0.1% to zero depends on the exchange rate of JPYUSD at that time and Japan's domestic political environment at that time】

Takahiro Sekido, Chief Japan Strategist at MUFG and former Head of Macro Stress Testing at the BOJ, also told reporters that he believes that the BOJ could raise its policy rate from -0.1% to zero in July 2024 after the annual wage negotiations in the spring of 2024 deliver an increase, but that this would depend on the exchange rate of JPYUSD at that time and Japan's domestic political environment at that time.