Mohicans markets：MHM Today News

December 14, 2022 - Fundamentals Reminder

☆ At 17:00, IEA released the monthly crude oil market report.

☆ At 23:30, the US announced EIA crude oil inventory and EIA strategic oil reserve inventory for the week ending December 9.

☆ At 03:00 the next day, the Federal Reserve FOMC announced its interest rate resolution and policy statement; 03:30 Federal Reserve Chairman Powell held a press conference on monetary policy. The market generally expects that the pace of the Federal Reserve's interest rate increase will slow down to 50 basis points, making the federal funds rate rise to 4.25% - 4.50%. But more importantly, Powell's description of the interest rate path next year, and any hint of interest rate reduction may trigger a new round of revelry.

Market Overview

Review of global market trend

On Tuesday (December 13), the US November CPI data was lower than expected, which further confirmed the expectation that the Federal Reserve would slow down this week. However, in the afternoon of the US stock market, there was a rumor that the CPI was leaked in advance. CPI data triggered sharp fluctuations in the market.

The dollar index fell sharply, breaking the 104 level to 103.59, closing down 0.59%. Non US currencies rose sharply, with the euro rising more than 1% against the US dollar and the pound rising to a six-month high of 1.06 and 1.23 respectively; The US dollar fell below the three levels of 137-135 against the Japanese yen. The Australian dollar and New Zealand dollar rose sharply by about 2% against the US dollar.

After the CPI was released, US bond yields fell sharply, and short-term bond yields fell even more. The 10-year US bond yield fell by as much as 19 basis points and once fell to 3.50%, pushing the daily low to 3.42%; The yield of two-year US bonds fell by more than 26 basis points to 4.14% at the deepest point. The 2Y/10Y inverted hanging range is narrowed to the 70BP line.

The plunge in US dollar and US bond yields boosted gold prices. Spot gold rose more than $40 for the first time in the US market, standing at $1820 per ounce, the first time since June 30, and then fell back, eventually rising 1.65% to $1810.77 per ounce; Spot silver broke through the $24 mark in the session and closed 1.8% higher at $23.74/oz.

Both US and Brunei crude oil rose by more than 4%. WTI crude oil once exceeded US $76/barrel and Brent crude oil exceeded US $81. Finally, WTI crude oil closed 2.54% higher at 75.15 USD/barrel; Brent crude oil closed 2.97% higher at USD 80.37/barrel.

The US stock market opened sharply, but most of the gains evaporated later. The Dow rose 0.31%, the Nasdaq rose 1.01%, and the S&P 500 rose 0.74%. Tesla closed down 4%, and its intraday market value once fell below $500 billion.

European stocks gained collectively, with Germany's DAX30 index up 1.31%, Britain's FTSE 100 index up 0.77%, France's CAC40 index up 1.42%, Europe's Stoxx 50 index up 1.65%, Spain's IBEX35 index up 0.84%, and Italy's FTSE MIB index up 1.33%.

Market Focus

1. U.S. CPI data for November both fell back and were lower than expected in the same chain of growth, and the market made a significant adjustment to Fed rate hike path expectations. As of this morning, the market is betting that the Fed will reach a terminal rate of 4.85% in May next year, down 13BP from yesterday, while the level of interest rates is expected to exceed the inflation rate in March next year and usher in at least one standard rate cut in November.

2. Rumors of an early leak of CPI data due to a surge in U.S. Treasury buying ahead of the release of the data, of which both the Labor Department and the White House said they were unaware.

3. Nick Timiraos: CPI data will complicate the discussion of the Fed officials on the magnitude and duration of rate hikes early next year, but will not change the outcome of this week's session.

4. TC Energy still plans to fully restart Keystone, an important U.S.-Canada pipeline, by Dec. 20.

5. OPEC monthly report: cut oil demand forecast for the first quarter of next year, urging all parties to remain cautious.

6. Cryptocurrency saw at least $1.14 billion in net withdrawals in a single day; SBF's bail request was denied and he faces up to 115 years in prison.

7. EU did not agree on gas price cap, price may be compromised to 160-220 EUR/MWh, key decision to be made on 19th of this month.

8. Overnight U.S. stocks opened higher and lower, the Nasdaq was up nearly 4% at the beginning of the session and eventually closed up 1%, gold rose to a new high of nearly six months, U.S. bond short-end yields retreated sharply, the 2Y/10Y inversion narrowed to 70BP a line.

Geopolitical Situation

Conflict Situation：

1. French President Macron: agreement on the removal of heavy weapons from the Zaporozhye nuclear power plant in Ukraine has been reached.

2. The Kremlin denies reports that Russian troops may be withdrawn from Ukraine by the end of the year.

3. According to local officials, an air strike alert was issued across Ukraine and sirens sounded in Kiev.

4. Belarusian Defense Ministry: unannounced checks on the combat readiness of troops have been started.

5. Ukrainian Foreign Minister: Russia may restore full offensive capabilities in February next year.

6. The Ukrainian army is about to run out of ammunition and spare parts for its S-300 and Beech air defense missile systems, which are used in response to Russian missile strikes.

Energy Situation：

1. The EU has not agreed on a gas price cap and the price may be cut to 160-220 EUR/MWh, with the key decision to be made on the 19th of this month. Negotiations will continue on a bilateral basis.

2. French grid operator RTE confirmed that it has been asked to reduce its electricity exports to the UK by about half.

3. Turkish Maritime Authority: agreement has been reached on new tanker insurance regulations.

4. Ukraine's Odessa military administration said Odessa will continue to implement emergency power outages.

5. Russian media: Russia has decided to respond to the oil cap. Russia will not sell oil to those countries that set price caps.

Institutional Perspective

1. Goldman Sachs：Lowered international oil price expectations for the first half of next year.

2. SOCIETE GENERALE：The Bank of Canada is expected to raise rates by 50 basis points to 4.25%, a decision that may trigger subconscious buying of the Canadian dollar.

3. MUFG：U.S. CPI and FOMC meeting may trigger a short squeeze in the dollar before year-end.

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