Mohicans markets：MHM TODAY NEWS

November 3, 2022 - Fundamentals Reminder

☆ At 20:00, the Bank of England announced the interest rate resolution and meeting minutes. The market generally expects the Bank of England to raise interest rates by 75 basis points on Thursday, the largest rate increase in 33 years and the eighth consecutive rate increase. However, the imminent recession and a major turn in fiscal policy may bring a dove turn signal.  

☆ At 20:30, Bank of England Governor Bailey held a press conference.

☆ At 20:30, the United States announced the number of people who applied for unemployment benefits at the beginning of the week to October 29, and the U.S. trade account in September.

Review of global market trend

On Wednesday (November 2), under the influence of the Federal Reserve's interest rate resolution, the dollar index fluctuated sharply, falling below 111 after the resolution was announced, but Powell rebounded sharply after his speech, breaking 112, and finally ended up 0.511% at 112.13. Non US currencies followed the fluctuation of the US index. After the resolution was released, they rose first and then fell. The euro fell to 0.99 against the US dollar, the pound fell to 1.15 and 1.14 against the US dollar, and the US dollar rebounded to above 147 after falling below 146 against the Japanese yen.

The yield of US Treasuries staged a V-shaped reversal again, and the yield of 10-year US Treasuries broke through 4.1% after falling below the 4% threshold; The yield of two-year US debt, which is more sensitive to monetary policy, fell to 4.439% and then rose sharply to exceed 4.6%.

Spot gold fluctuated narrowly before the announcement of the resolution. After the announcement of the resolution, it rose nearly $20 to close at $1670 in the short term. Later, after Powell's speech, it fell to $1640 and finally closed down 0.68% at $1636.24 per ounce; The spot silver once broke the $20 mark, but then fell sharply, and finally fell 2.14% to $19.23/oz.

Crude oil stopped falling and turned higher in the session. The US EIA crude oil inventory decreased by more than 3.1 million barrels last week, supporting oil prices. WTI crude oil closed 0.69% higher at 89.98 USD/barrel; Brent crude oil closed 0.8% higher at USD 97.44/barrel. US natural gas rose by more than 8% to return to the whole US $6 position. The European benchmark Netherlands TTF natural gas futures for December rose by more than 14% to 133 euros/MWh in late trading, and ICE UK natural gas rose by more than 15% to a daily high of 323p/kcal in late trading.

After the Federal Reserve announced an interest rate increase of 75 basis points, US stocks first rose and then fell back, and the decline widened in the late trading. The Dow fell 1.55%, the Nasdaq fell 3.36%, and the S&P 500 fell 2.5%. Star technology stocks closed down collectively, with Tesla down more than 5%, Amazon and Netflix down more than 4%, and Apple down more than 3%.

European stocks generally fell at the end of the day. Germany's DAX30 index fell 0.61%, Britain's FTSE 100 index fell 0.58%, France's CAC40 index fell 0.81%, and Europe's Stoxx 50 index fell 0.79%.

Market Focus

1. The Fed raised rates by 75BP as expected, and the statement hinted at a slower pace of rate hikes. Powell said in the subsequent briefing that the terminal rate is expected to be raised and what matters is not the speed of rate hikes but the end point of the hike and the duration of the restrictive rate; that it is too early to consider a pause in rate hikes; and that the future focus is on CPI data.

2. Market reaction to the Fed: Risk assets moved sharply higher after the dovish statement from the FOMC, with the dollar index falling driving a number of non-dollar mainstream currency pairs up 100 points, but market conditions took a sharp turn for the worse after Powell said terminal interest rate expectations would be raised. The Nasdaq ended up from a nearly 1% gain to close down at 3.3%, with gold and silver erasing all gains and probing deeper downward, and U.S. bond yields regaining their gains to refresh their daily highs. As of this morning, the market predicted that the probability of the Fed raising interest rates in December by 75BP is about 25%, which will reach the terminal rate of 5.08% for the current round of rate hikes in May next year.

3. The White House made a sudden statement in support of the Fed's independence minutes before the Fed announced its interest rate resolution and believes that the Fed's policies can keep inflation under control.

4. Following the unexpected increase recorded in JOLTS job openings data released yesterday, the US ADP employment added 239,000 in October, better than expected.

5. In response to the Iran nuclear deal negotiations, European Commission Vice President and “Foreign Minister” Borrelli said, “We are optimistic about the outcome”.

6. Iran's Foreign Ministry: The West's announcement of Iran's “imminent” strike against Saudi Arabia is a deliberate attempt to foment an atmosphere of opposition to Iran.

7. Russia resumed participation in the Black Sea grain agreement on the 2nd, CBOT wheat futures fell. Putin said Russia reserves the right to withdraw from the agreement again.

8. UK Times: UK plans to extend the windfall profits tax for oil and gas companies, expected to increase revenue by 40 billion pounds in 5 years.

Geopolitical Situation

Conflict Situation:

1. The Russian Foreign Ministry issued a statement on preventing nuclear war.

2. Russia's Kursk Region extended the “yellow” terrorist attack risk level until November 21.

3. Russian military personnel foiled an attempt by the U.S. special services to sabotage the energy infrastructure of the Crimean Peninsula.

4. Russian troops repelled all attempts of the Ukrainian army to advance in Kherson region, eliminating 105 Ukrainian soldiers.

5.The sources: During the special military operation, Russian long-range bombers repeatedly carried out high-precision strikes on Ukrainian military facilities with the new cruise missile X-32, which is called “carrier killer”.

Food Situation：

1. Russia resumed participation in the Black Sea Grain Agreement on the 2nd and CBOT wheat futures fell. Putin said Russia reserves the right to withdraw from the agreement again.

2. Russia will decide whether to extend the grain deal by Nov. 18.

3. Zelensky: On Wednesday, a Russian plane fired a cruise missile over the Black Sea corridor used for grain exports.

Energy Situation：

1. The company “Nord Stream” has completed the collection of information on the first damaged pipeline.

2. Ukrenergo, the energy company of Ukraine, will restrict power supply to Kiev and 7 other regions.

3. Ukrainian Electricity Company Yasno: After the attack on the energy infrastructure, the time frame for restoring power in different parts of the country ranged from 3 to 28 hours, with Kiev taking the longest time.

Institutional Perspective

1. Goldman Sachs：Issuance deal activity is likely to rebound next year as corporate issuers and investors get used to a tougher environment.

2. SOCIETE GENERALE：The Bank maintains its forecast of a 75 basis point rate hike by the Bank of England next week and a peak of 4.5% at the March 2023 meeting.

3. MUFG：The Bank of Japan's holdings of newly issued 10-year Japanese government bonds (JGB) exceeded those sold at the auction, demonstrating its strong commitment to defending its low interest rate policy.

Statement|Disclaimer

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