MHMarkets;February 7, 2024 Economic Highlights

Date: February 7, 2024

Economic Highlights (GMT + 8)

1:00am

USDFOMC Member Mester Speaks

1:45am

CAD BOC Gov Macklem Speaks

5:45am

NZDEmployment Change q/q

NZDUnemployment Rate

4:00pm

CHFForeign Currency Reserves

Market Overview

Global Market Recap

On Thursday, the US Dollar Index reversed its upward trend under pressure from a strengthening British Pound, falling back to the vicinity of the 103 level, close to its level before the Federal Reserve's interest rate decision was announced on Wednesday, ultimately closing down 0.446% at 103.06. As concerns over a resurgence in the banking crisis offset the cooling expectations for interest rate cuts, the yield on 10-year US Treasury notes fell below the 3.9% mark, ultimately closing at 3.882%, setting a new low since the start of the year. The yield on the two-year US Treasury notes, which are more sensitive to Federal Reserve policy rates, closed at 4.211%.

Spot gold continued to rise after the initial jobless claims report was released, erasing all its intraday losses, reaching a high of 2065.29, and ultimately closing up 0.76% at $2054.9 per ounce, marking the fourth consecutive trading day of gains and setting a new half-month high. Spot silver ultimately closed up 1.04% at $23.18 per ounce.

Affected by media reports that Hamas and Israel are hopeful to reach a ceasefire agreement, international crude oil prices plummeted during the session, turning from gains to losses, and closing at a new low since January 23rd. WTI crude closed down 2.54% at $73.82 per barrel; Brent crude closed down 2.08% at $78.77 per barrel.

The three major US stock indices all closed higher, with the Dow Jones Industrial Average up 0.97%, the S&P 500 up 1.25%, and the Nasdaq up 1.3%. The KBW Bank Index fell 1.7%, with Western Alliance Bancorporation (WAL.N) dropping more than 7%, and New York Community Bank (NYCB.N) falling 11%. The Nasdaq Golden Dragon China Index rose 1.38%, with Li Auto (LI.O) up more than 5%, and Bilibili (BILI.O) up 3%.

European stock indices were uniformly in the red, with the Euro Stoxx 50 index closing down 0.21%.

Market Highlights:

· The number of initial jobless claims in the US unexpectedly rose last week.

· The voting ratio of the Bank of England's Monetary Policy Committee was more hawkish than expected.

· OPEC+ maintains its oil production policy unchanged.

· There are reports that Hamas and Israel are hopeful to reach a ceasefire agreement.

· The asset size of U.S. money market funds has reached $6 trillion for the first time.

· Yi Gang: We must make every effort to increase capital investment across society.

· The securities transaction stamp duty in 2023 decreased by more than 34% year-on-year.

Institutional Views:

1. Danske Bank

Danske Bank's analysis indicates a positive outlook for the British Pound (GBP), bolstered by the strength in the labor market and improvements in PMI data. The bank's sustained long positions in GBP versus the US Dollar (USD) and the Euro (EUR) demonstrate a belief in the Pound's robustness and its prospects for appreciation as expectations for central bank rate cuts are reevaluated. As the economic backdrop shifts, positions in GBP present compelling prospects for investors aiming to capitalize on changes in the monetary policy landscape.

2. Credit Agricole

Credit Agricole's analysis points out that the recent trend of the US Dollar (USD) gaining strength in a risk-on environment signifies a change in how investors perceive the USD, now valuing it for its yield opportunities within a robust global economic scenario. This shift in viewpoint suggests that the USD could see more significant gains against currencies with lower yields, underscoring a sophisticated appreciation of the relationship among risk appetite, expectations around monetary policy, and the dynamics of the currency markets.

3. Société Générale

Société Générale suggests that the unanticipated robustness of the US economy could drive additional short-term gains for the US Dollar (USD). Nonetheless, considering the dollar's elevated valuation, any further appreciation is anticipated to unfold slowly, against a context of subdued volatility. The existing economic disparity between the US and its key global counterparts, notably Europe and China, highlights the intricate nature of the global monetary policy environment and its impact on the currency markets. Investors are encouraged to brace for a situation in which the dollar strengthens incrementally, marked by episodes of low market volatility.