MHMarkets：November 6, 2023,--Fundamental Reminder

16:50 EUR France Services PMI Final (OCT)

16:55 EUR Germany Services PMI Final (OCT)

17:00 EUR Services PMI Final (OCT)

17:30 EUR Sentix Investor Confidence (NOV)

22:00 OpenAI Holds the First Developer Conference

23:00 USD New York Fed GSCPI (OCT)

Market Overview

Review of Global Market Trend

Last Friday, with weaker than expected US employment data and ISM services data increasing speculation about the end of the Federal Reserve's interest rate hike, the US dollar index plummeted and hit the 105 mark in the session, marking the first time since September 20. It ultimately closed down 1.017% at 105.08.

The yield of US Treasury bonds plummeted collectively, with the 10-year Treasury bond yield falling by more than 10 basis points for the third consecutive day. For the first time in a month, the yield fell below 4.5% and finally closed at 4.576%. The two-year Treasury bond yield, which is more sensitive to the Federal Reserve's policy interest rates, fell by nearly 20 basis points at one point and finally closed at 4.843%.

According to the announcement of non agricultural data, spot gold rose nearly $15 in the short term to above the 2000 mark, and then took back some of its gains, ultimately closing up 0.34% at $1992.27 per ounce; Spot silver rose 1.98% to close at $23.2 per ounce.

With the easing of supply concerns caused by tensions in the Middle East, and signs of a global economic slowdown leading investors to refocus on demand prospects, international oil prices have resumed their decline, and WTI crude oil closed 1.96% lower at $80.83 per barrel; Brent crude oil closed 2.07% lower at $85.12 per barrel.

The three major US stock indices closed up for the fifth consecutive day, with the Dow Jones Index up 0.66%, the S&P 500 Index up 0.94%, and the Nasdaq up over 1%. Apple (AAPL.O) closed down 0.44%, with its revenue declining year-on-year for four consecutive quarters. Popular Chinese concept stocks generally closed higher, with NIO. N up more than 5%, XPEV. N up more than 3%, and LI.O up nearly 3%.

The main European stock indices ended mixed. The Stoxx 50 index in Europe closed up 0.12%, the DAX30 index in Germany closed up 0.3%, the FTSE 100 index in the UK closed down 0.39%, the CAC40 index in France closed down 0.18%, the IBEX35 index in Spain closed up 0.36%, and the FTSE MIB index in Italy closed up 0.69%.

Market Focus

1. After the October quarterly adjustment in the United States, the non farm employment population increased by 150000 people, the smallest increase since June. The market expected 180000 people, and the total number of new employment in August and September was 101000 fewer than before the correction; The monthly unemployment rate recorded 3.9%, the highest level since January 2022, and the market expects it to be 3.8%. After the release of non farm data, federal fund futures prices showed that the likelihood of the Federal Reserve raising interest rates by January next year decreased to less than 20%. Swap market prices indicate that the Federal Reserve is expected to lower interest rates for the first time until June next year, previously in July next year.

2. Atlanta Fed Chairman Bostick: Satisfied with Friday's release of non farm employment data and may support maintaining current interest rates for approximately 8-10 months. Minneapolis Fed Chairman Kashkari: Although the slowdown in recruitment is good news for the Fed, I don't want to overreact to a month's data. Richmond Fed Chairman Barkin: The view on whether to raise interest rates again will depend more on the inflation report. Former US Treasury Secretary Summers also warned investors not to rush to announce that the Fed's work has been completed.

3. Traders are betting that major central banks will shift towards monetary easing more quickly. The European Central Bank will cut interest rates by 50 basis points before July 2024, with the money market fully priced. The UK interest rate futures are fully priced. The Bank of England will make two 25 basis point rate cuts before November 2024.

4. The Palestinian Israeli conflict has resulted in over 11300 deaths on both sides, and the Israeli Prime Minister has stated that there will be no ceasefire until the hostages are released; The statement about using nuclear weapons to attack Gaza is unrealistic. The Israeli military: comprehensively surround Gaza City, cut off connections between the north and south of the area, Iran's highest leader meets with Hamas leaders, Iran warns the United States that if there is no ceasefire in Gaza, the United States will be severely hit.

5. Von der Leyen praised Kiev for “outstanding progress” in reform, and Zerensky said Ukraine would do its best to start negotiations with the EU on accession.

6. The US House of Representatives passed a bill with a vote of 342-69 on the same day, aimed at promoting punishment for entities involved in Iran's oil trade.

7. Saudi Arabia will continue to voluntarily reduce production by 1 million barrels per day in December. Russia will continue to reduce production by 300000 barrels per day before the end of December.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs: Non farm Report Highlights Signal of End of Fed Rate hikes】

Goldman Sachs Chief Economist Jan Hatzius stated that last Friday's non farm employment data was much weaker than expected, but it was not yet weak to a worrying level. Hatzius said, I think this is a relatively weak report that highlights the information the market received from last week's FOMC meeting that the Federal Reserve is likely to end interest rate hikes

He added that Goldman Sachs does not expect the Federal Reserve to cut interest rates before the fourth quarter of 2024, but if the economy weakens further ahead, the rate cut may come earlier.

02

Societe Generale

【Societe Generale: It is expected that the Bank of England will start cutting interest rates in May next year】

The Bank of England meeting in November did not bring any real surprises, according to a research report by Societe Generale. The data since September only reinforces the views of those who voted to keep interest rates unchanged and vote to raise them. If the Bank of England's forecast is correct, it may not see another rate hike, and the focus has shifted to how long interest rates will remain at this level to bring inflation back to its target. Given that recent weak growth will lead to greater economic weakness, the rate of inflation pullback should be faster than the central bank's forecast. Therefore, it is expected that by May next year, the weak economy will need to be boosted, and there are clear signs that inflation is trending back to the target level, which should allow the central bank to start cutting interest rates.

03

CICC Corporation

【CICC: Trading window period brought by overseas macro changes】

CICC's research report pointed out that there were significant changes in overseas macro factors last week: from a fundamental perspective, the US October non farm data was less than expected, and the ISM manufacturing PMI was weak, indicating a cooling of economic activity. From a policy perspective, the Federal Reserve has stated that it is not in a hurry to raise interest rates, and the US Treasury's bond issuance plan is biased towards “doves”, indicating that policy authorities hope to calm market anxiety.

Under the combination of various factors, investors' risk appetite has improved, US stocks have rebounded, US bond interest rates have fallen, and the US dollar has fallen. The China Financial Research Report believes that the US economic data is lukewarm and tepid, and the need for further interest rate hikes by the Federal Reserve has decreased. The market may enter a trading window period, and assets that have undergone significant adjustments in the early stages are expected to be repaired. But it also reminds us not to place excessive bets on the expectation of US easing, as if interest rates fall too much and financial conditions are too relaxed, it will still cause the Federal Reserve to retaliate.