MHMarkets: August 10, 2023 - Fundamental Reminder

☆Today, OPEC will release its monthly crude market report.

☆20:30 USD Inflation Rate (JUL)

The market now expects Inflation Rate to accelerate somewhat to 3.3% and unchanged at 0.2% month-on-month; Core CPI growth will remain at 4.8% year on year.

☆20:30 USD Initial Jobless Claims

The market is expecting 230,000 claims, which is up from 227,000 previously.

☆The next day at 4:15, Philadelphia Fed President Harker will speak, so investors can continue to watch for his views on the labor market and any comments on Inflation Rate.

Market Overview

Review of Global Market Trend

On Wednesday, spot gold reversed course after reaching an intraday high of $1,932.39 and accelerated below the $1,920 mark in U.S. trading before settling down 0.57% at $1,914.35 per ounce. Spot silver was blocked at the $23 mark and last traded down 0.5% at $22.66 per ounce.

The dollar index remained above the 102 mark, but trading was light and rangebound, ending down 0.06% at 102.48. Treasury yields recovered, with the two-year yield back above 4.8% to close at 4.810%; The yield on the 10-year Treasury note slipped but still stood above the 4% mark at last close at 4.016%.

Crude oil both rose more than 1% on Wednesday. WTI crude began its rally in European trading, reaching an intraday high of $84.65 in U.S. trading, a multi-month high, before closing up 1.69% at $84.18 per barrel. Brent crude hit its highest level in nearly seven months and ended up 1.56% at $87.42 per barrel. In natural gas, European gas futures jumped 40%, the most since March 2022, as LNG supply risks mounted; U.S. natural gas rose to a 22-week high on hot weather.

The Dow Jones Industrial Average closed down 0.54%, the Nasdaq fell 1.17% and the S&P 500 fell 0.7%. Technology stocks weakened, with Nvidia closing down more than 4.7%, Tesla down 3% and the trillion-dollar market cap ranks, led by Apple, all falling in the 1% line. Nasdaq China Golden Dragon Index edged down 0.09%, “NIO” continued its decline, NIO and Xpeng Motor both fell more than 4%, Li Auto fell 1.8%.

Major European stock indexes rebounded, with Germany's DAX30 closing up 0.49%, the U.K. 's FTSE 100 up 0.8% and the Euro Stoxx 50 up 0.66%.    

Market Focus

1. International oil prices rose to their highest point of the year.

2. The President of Pakistan has signed a presidential decree approving the dissolution of the National Assembly.

3. Iran will produce an additional 250,000 barrels a day by the end of the summer.

4. Rice prices in Asia rose to their highest level since 2008 after a drought in Thailand and a partial export ban in India.

5. European natural gas futures jumped 40% as LNG supply risks intensified; U.S. natural-gas prices rose to a 22-week high on hot weather.

6. WSJ: The U.S. and Saudi Arabia reached a broad agreement on the latter normalizing relations with Israel. The White House responded that discussions were ongoing but no framework had been reached.

7. Russia's central bank announced it would stop buying foreign exchange from the domestic market for the rest of the year. The ruble, which has lost more than 33% of its value this year, has recently neared the 100 mark against the dollar.

8. EIA: US Strategic Petroleum Reserve stocks increased by 99.5 million barrels last week, recording the largest weekly increase since June 2020; Crude exports fell by nearly 3 million barrels a day, the biggest drop on record.

9. Foreign media: Internet giants such as Byte and Tencent have placed a $5 billion AI chip order with NVIDIA, of which 100,000 A800s will be delivered this year, and the remaining $4 billion worth of orders will be delivered next year.

Geopolitical Situation

Conflict Situation

1. TASS: 11 people were injured in an explosion at an industrial building in the Moscow region.

2. TASS: Russia will increase its military presence on the western border, the defense minister said.

3. Russian news agency: Russian security forces say Ukraine attempted to attack spent nuclear fuel storage facility at Zaporozhye nuclear power plant.

4. Russian attack on residential area in Ukrainian city of Zaporozhye kills two people, local officials say.

5. Experts: drone attacks may become more frequent in the Russian-Ukrainian conflict.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: Predicting Crude Oil Supply Growth Rate from Next Energy Development Projects.

02

SOCIETE GENERALE

Societe Generale: EURUSD is Expected to Fall Next Month Unless Data is Favorable.

August 9, the euro is likely to fall against the dollar in September as investors cut large long euro positions, said Kit Juckes, foreign exchange strategist at Societe Generale, in a report. The difference between two-year Treasury yields and expectations for growth in the Eurozone and the United States suggest that the euro against the dollar today at the level should have been a little lower than it is now. One explanation for this is the existence of a large and committed long-term long euro-dollar position, which is likely to continue for some time, keeping the euro stable against the dollar. However, come September, unless economic data and expectations for Fed and ECB policy favor the euro, we will see a capitulation of long euro positions.

03

MUFG

【MUFG: Japan's First Trade Surplus in Nearly Two Years, Which is Expected to Support the Yen】

August 10, MUFG said that over time, Japan's shift to a trade surplus will become a “key” factor in supporting the yen exchange rate. Earlier this week, Japan released data showing that the country's first trade surplus since October 2021, the size of the largest since July 2021, too. Derek Halpenny, head of global market research for Europe at MUFG, noted that “the fading of the negative energy price shock is a crucial fundamental shift for the yen.” As Japan's energy supply is mostly dependent on imports, last year's energy price spike on the yen exchange rate and Japan's current account pressure, but in the wake of a sharp decline in natural gas imports, the corresponding pressure has ceased to exist, which means that the dollar against the yen to further higher space or has been limited.