June 6, 2023 - Fundamental Reminder

☆ 12:30 AUD RBA Interest Rate Decision

☆ 17:00 EUR Retail Sales MoM (APR)

☆ 22:00 USD New York Fed GSCPI (MAY)

☆ 24:00 EIA releases its monthly short-term Energy Outlook report

☆  The next day at 04:30 USD API Crude Oil Stock Change (JUN/02)

Market Overview

Review of Global Market Trend

The ISM services index, released Monday, unexpectedly fell to 50.3 in May, a slight expansion, and factory orders in April were similarly muted. After the data was released, the dollar index turned negative, briefly losing the 104 mark, only to close barely back at 104, down 0.14 percent at 104.01.

Treasury yields similarly turned lower after the data, with the two-year yield falling as much as 9 basis points to 4.41% before closing at 4.47%. The yield on the 10-year Treasury note fell to near 3.68% from 3.7% on the day.

Spot gold got a boost from both the dollar index and Treasury yields, which continued to rise after the data. U.S. stocks rose as high as $1,964.1 an ounce in late trading, up nearly $30 from the day's low of $1,938.16 an ounce, before closing up 0.7% at $1,961.7 an ounce. Spot silver, which surged after the data, fell 0.22 percent to $23.57 an ounce.

At Sunday's Opec + meeting, crude oil jumped at the open, with WTI crude rising as high as $74.36 a barrel, after Saudi Arabia unilaterally announced an additional 1 million barrels a day of cuts in July and other members extended existing cuts to the end of 2024. Oil prices then continued to retreat on lingering growth concerns, closing down 0.06 percent at $71.88 a barrel. Brent crude rose as high as $78.65 a barrel in early trading, before giving up most of its gains to settle up 0.32 percent at $76.44 a barrel. European natural-gas futures are up more than 20% on signs of tightening supplies in the liquefied natural gas market and the prospect of stronger demand in Asia.

The three major U.S. stock indexes closed down collectively, with the Dow Jones Industrial Average down 0.59 percent, the S&P 500 down 0.19 percent and the Nasdaq down 0.09 percent. Among individual stocks, Apple, which unveiled new products such as its $3,499 Vision Pro headset, closed 0.76 percent lower after rising more than 2 percent earlier in the session, while Disney, which has partnered with Apple on headset content, gained 0.25 percent.

Major European stock indexes closed in the red, with Germany's DAX30 down 0.53 percent. Britain's FTSE 100 closed down 0.10%; France's CAC40 index closed down 0.96%; The Stoxx Europe 50 index closed down 0.71%; Spain's IBEX35 index closed down 0.27%; Italy's FTSE MIB closed down 0.81%.       

Market Focus

1. Following OPEC's move to cut production, the US energy Secretary said he was concerned about oil prices and working with both producers and consumers to ensure that prices fall.

2. Apple unveiled its first MR Headset, the Vision Pro, priced at $3,499, along with its M2 Ultra chip.

3. US media: US regulators will propose raising overall capital requirements for large banks by an average of about 20% as early as this month.

4. Saudi Aramco set the price of Arab light crude oil for sale to Asia in July at $3 a barrel.

5. Former US Vice President Mike Pence has officially announced his candidacy for the 2024 US presidential election.

6. The U.S. Securities and Exchange Commission sued Binance and Zhao, alleging that billions of dollars of Binance client funds were mixed into accounts held by entities controlled by Zhao and seeking to freeze Binance assets. Binance has expressed disappointment with the charges, saying authorities had been misled on some points.

Geopolitical Situation

Conflict Situation

1. The commander of Ukrainian ground forces said that Ukrainian troops continue to “advance” near Bakhmut, without mentioning a Ukrainian counter-offensive. And a Ukrainian military spokesman, asked about Russia's claims that Ukraine is launching a large-scale offensive in the east, said, “We have no such information and do not comment on any false statements.”

2. Russian Defense Ministry: Ukraine continues to try to carry out “terrorist attacks” along the Russian border; Russia successfully repelled attempts by two Ukrainian “sabotage groups” to infiltrate the Belgorod region; Russian forces thwarted a major Ukrainian offensive in the Donetsk region and killed a man. A major Ukrainian offensive in the Donetsk region was thwarted and hundreds of pro-Kiev forces were killed; Russian troops destroyed eight Leopard tanks in Donetsk and suffered heavy losses to the Ukrainian army; Russian troops prevented all attempts by the Ukrainian army to attack in Donetsk.

3. Russian Defense Ministry: The Baltic Fleet began naval exercises, which will last until June 15, with about 40 ships and more than 3,500 servicemen participating in the exercises.

4. CNN: Ukraine has cultivated a network of agents in Russia and provided them with drones to carry out attacks.

5. Russia's Kaluga governor said two drones crashed on a highway in Russia's Kaluga region.

6. Russian Defense Ministry: Two Russian strategic bombers conducted routine flights in the Barents Sea and Norwegian Sea.

Sanction Situation

1. Russia's oil and gas revenues fell by more than a third in May, with the impact of lower crude oil prices under Western sanctions and reduced gas exports to Europe.

2. The U.S. Treasury Department's official website released new sanctions related to Russia, which target seven individuals and one entity institution.

Energy Situation

1. India imported more crude oil from Russia in May than from Saudi Arabia, Iraq, the United Arab Emirates and the United States combined, according to energy cargo tracker Vortexa.

2. Oil loads at Russia's western ports reached their highest level in four years in May, Reuters data showed.

3. Saudi Energy Minister Abdul Aziz: Saudi Arabia wants Russia to improve transparency in oil production.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs lowered its summer gas price forecast to $2.85 per MMBtu, compared with $3.30 per MMBtu; the forward price forecast is $2.31 per MMBtu.

02

SOCIETE GENERALE

【Societe Generale: 10-Year U.S. and German Treasury Spreads Expected to Narrow】

On June 2, Societe Generale interest rate strategists wrote in a report that there is room for a narrowing of the 10-year U.S. Treasury/German bond yield spread, which is consistent with the usual trend around the last Fed rate hike. They said, “Eurozone core inflation has yet to plummet, while the ECB's stance is less restrictive than the Fed's.” They said, “This has helped narrow the spread between U.S. Treasuries and U.S. Treasuries.” The yield spread between 10-year U.S. Treasuries and 10-year German Bonds currently stands at 135 basis points, with the 10-year U.S. Treasury yielding about 3.62% and the 10-year German Bond yielding about 2.27%, according to Tradeweb.

03

MUFG

The boosting impact of strong non-farm payrolls data on the dollar may have been partially dampened.