Mohicans markets：MHM Today News

February 7, 2023 - Fundamental Reminder

☆ TBD U.S. President Biden's State of the Union address

☆ 11:30 Australian Federal Reserve announces interest rate resolution

☆ 14:45 Swiss seasonally adjusted Unemployment Rate for January

☆ 15:00 Germany seasonally adjusted monthly rate of Industrial Production for December, U.K. January Halifax seasonally adjusted monthly rate of Home Price Index for January

☆ 15:45 France December Trade Balance

☆ 16:00 China January Foreign Exchange Reserves

☆ 21:30 U.S. December Trade Balance

☆ Next day 01:00 EIA releases monthly Short-Term Energy Outlook report

☆ Next day 01:40 Fed Chairman Powell delivers a speech

☆ Next day 01:45 Bank of Canada Governor McCollum delivers a speech

☆ Next day 05:30 U.S. API Crude Oil Inventories for the week of February 3

Market Overview

Review of Global Market Trend

Influenced by the unexpected non-farm data, the market was still pricing the Fed to turn hawk on Monday. In addition, Bostek, FOMC Voting Commission and Chairman of the Atlanta Federal Reserve in 2024, also “set off the eagle”. At present, the probability of the Federal Reserve raising interest rates by 25 basis points in March is up to 97%, and the probability of the peak interest rate exceeding 5% this summer is close to 85%. The dollar index continued to be boosted, closing 0.5% higher at 103.65, rising for three consecutive days to a four-week high.

Influenced by the hawkish speech of Bostock, the yield of US Treasuries rose at the end of the day. The yield of 10-year US Treasuries rose by 11 basis points at one time, from 3.55% to 3.64% within the day, and rose for two consecutive days to a new four-week high. The yield of the 2-year US bond rose by 18 basis points during the session, and as of the closing of the U.S. stock market, it was close to 4.48%, erasing all the decline since January 6.

Although suppressed by the strong rise of the US dollar, the fear of economic slowdown and even recession has not subsided. The safe-haven nature of gold has again attracted investors. Spot gold stopped falling three times and closed up 0.11% at $1867.69 per ounce. Spot silver fell 0.3% to$22.28 per ounce.

Crude oil recovered its lost ground after the initial decline in the U.S. market. As the Türkiye earthquake stopped the operation of a major oil hub, the western countries' price ceiling on Russian refined oil also came into effect on February 5. In addition, the Director of the International Energy Agency said that China's demand might exceed expectations, and the market began to worry about supply problems, the U.S. and the Brazilians both stopped falling for three consecutive times. WTI crude oil rose 1.67% to $74.4 per barrel, and Brent crude oil rose 2.01% to $81.29 per barrel. The European benchmark TTF Dutch natural gas futures fell 0.9% late in the day, hovering at a one-year and a half low.

The U.S. stock market closed with the Dow index down 0.11%, the Nasdaq index down 1% and the S&P 500 index down 0.62%. Popular Chinese stocks generally fell, with Lujin Stock Exchange closing down more than 7%, iQIYI closing down more than 6% and Bilibili closing down 4%.

Most European stocks opened lower, with Germany's DAX30 index down 0.84%, Britain's FTSE 100 index down 0.84%, France's CAC40 index down 1.34%, Europe's Stoxx 50 index down 1.22%, Spain's IBEX 35 index down 0.68%, and Italy's FTSE MIB index up 0.14%.

Market Focus

1. Two earthquakes of 7.8 magnitude occurred in Turkey within one day, and neighboring Syria was also affected. According to comprehensive foreign media reports, the earthquake has killed 3705 people in both countries.

2. Federal Reserve Bostick: The basic expectation is still to raise interest rates twice more. The NFP data increases the possibility that the terminal interest rate will become higher.

3. Russia sold 3.63 tons of gold from the National Wealth Fund in January.

4. Biden hopes to quadruple the share repurchase surcharge of American companies, and calls for a minimum income tax on billionaires.

5. The news said that the United States was ready to impose a 200% tariff on Russian aluminum metal as early as this week. Russia is the second largest aluminum producer in the world.

6. Deputy Chief Cabinet Secretary of Japan Isozaki: The report that Masayoshi Amamiya was nominated as the next governor of the Bank of Japan is untrue.

7. Saudi Arabia raised the price of most oil sold to Asia, Europe and the United States in March.

8. After the earthquake damage, Azerbaijan's crude oil export from Ceyhan Port, Turkey will continue to be suspended from February 6-8.

Geopolitical Situation

Conflict Situation:

1. Zelensky has submitted a draft law on the extension of the wartime status and the general mobilization decree, which will be extended for another 90 days from February 19.

2. Ukrainian media: Zelensky held a meeting of the Supreme Command, which heard the report of the situation of the commander of the Ukrainian armed forces on the front line, and paid special attention to the situation of the direction of Bakmut. In addition, the meeting considered the appointment of persons in charge of military and political departments in some regions.

3. Russian Ministry of Defense: The Russian army has controlled Mykolaivka in Donetsk.

4. In an interview with a Ukrainian media, Ukrainian Defense Minister Reznikov denied the rumors that he might be transferred to another department.

5. United Nations Secretary-General Guterres said that the prospects for peace between Russia and Ukraine are increasingly dim, and the possibility of escalation is increasing.

6. The National Energy Corporation of Ukraine announced that as of the morning of February 6, local time, due to the impact of cold weather, electricity consumption in some regions of Ukraine increased, and there was a gap in power supply. At present, Kiev, the capital of Ukraine, and Odessa and Kiev have taken emergency power rationing measures.

Energy Situation:

1. Chairman of Novatek, Russia's second largest natural gas producer, plans to supply LNG to India.

2. Indian Oil Minister: Russia may not continue to be India's largest oil supplier.

Institutional perspective

01

Goldman Sachs：Goldman Sachs lowered its US recession forecast to 25%

Goldman Sachs economists believe that the risk of the US economic recession is receding, the employment market continues to be strong, and there are signs that business confidence is improving. The Goldman Sachs team led by Jan Hatzius lowered its estimate of the US economic recession in the next 12 months from 35% to 25%. Historically, the typical probability of economic recession in any 12-month period is about 15%. Hatzius believes that the employment market continues to strengthen and the business confidence survey shows signs of improvement, indicating that the risk of recent economic downturn has been significantly reduced.

02

SOCIETE GENERALE：The European Central Bank is expected to raise interest rates by 50 basis points again

It is expected that the European Central Bank will raise interest rates by 50 basis points again, and by 25 basis points in March. By July, the terminal interest rate will reach 3.75%. At that time, the risk may become more symmetrical. The bank also expects that the QT of the asset purchase plan will be slightly accelerated by the end of this year, while the reinvestment of the comprehensive emergency anti-epidemic debt purchase plan (PEPP) will be completed by the middle of 2024. The European Central Bank promised that this meeting will provide detailed parameters of QT, which may include the specific tightening amount of a single plan, as well as guidance on how flexible the European Central Bank can be. It is expected that there will be no major deviation in the capital element or term structure, except for some discretionary adjustments to the average capital flow over a period of time.

03

MUFGThe dollar has recovered most of its decline since the beginning of the year

Gold 10 data, February 6, Mitsubishi UFJ Financial Group said in a report that the US dollar continued to strengthen and reached the highest level against a basket of currencies in nearly four weeks after the release of the better-than-expected US employment data last Friday, because the US economy looked more resilient and there might be more interest rate increases. Market participants have begun to price the possibility that the Federal Reserve will raise interest rates at least twice by 25 basis points before suspending the rate increase cycle. The US interest rate market has lowered its expectation of starting to cut interest rates later this year, so the US dollar has recovered most of the decline since the beginning of the year.