Mohicans markets：MHM Today News

February 8, 2023 - Fundamental Reminder

☆ 07:50 Japan December Trade Balance

☆ 10:00 U.S. President Joe Biden gives State of the Union address

☆ 22:15 Fed's Williams gives an interview to the media

☆ 22:30 Fed Governor Lisa Cook attends seminar

☆ 23:00 U.S. monthly rate of Wholesale Sales for December, and Fed's Barr and Bostick speak

☆ 23:30 U.S. EIA Crude Oil Inventories and EIA Strategic Petroleum Reserve Inventories for the week ending Feb. 3

☆ The next day 01:30 Fed's Kashkari delivers a speech

☆ The next day 02:45 Fed Governor Waller delivers a speech

Market Overview

Review of Global Market Trend

Tuesday night's speech by Powell sent shockwaves through the markets. After he mentioned that the inflation retreat process had begun, the dollar index continued to fall, once dipping to 103; he then said that the inflation retreat process was only at the beginning, after which the dollar index recovered some of its lost ground and closed 0.2% lower at 103.39. U.S. bond yields turned lower after Powell's speech and recovered all their losses in late trading. The 10-year U.S. bond yield once fell more than 5 basis points, then pulled up 8 basis points, rising from 3.64% to 3.67% during the day. 2-year U.S. bond yield once fell more than 8 basis points to 4.4%, but has rebounded to near 4.47% by the end of the U.S. stock market.

Spot gold once rose $7 to $1884.31 per ounce after Powell's speech, but then erased all the gains and once fell below the $1870 mark, closing up 0.22% at $1871.88 per ounce. Spot silver also pulled up more than 1% after Powell's speech, but it still closed down 0.55% at $22.16 per ounce.

Crude oil rose sharply, with upward pressure on prices from an upbeat demand outlook due to the opening of China's economy and supply shortage concerns stemming from the closure of a major oil export terminal following the Turkey earthquake, in addition to Powell's speech. WTI crude closed up 4.23% at $77.55 per barrel and Brent crude closed up 3.45% at $84.09 per ounce. European benchmark TTF Dutch natural gas futures ended the day down nearly 5% as increased production and unusually warm temperatures reduced demand.

U.S. stocks strengthened in N-type. The Dow closed up 0.78%, the Nasdaq closed up 1.9% and the S&P 500 closed up 1.29%. ChatGPT concept stocks strengthened, with Baidu closing 12% higher; Microsoft closed up more than 4%, with total market capitalization returning to $2 trillion during the session.

 European stocks were mixed, Germany's DAX30 index closed down 0.14%, the FTSE 100 index closed up 0.35%, France's CAC40 index closed down 0.07%, the European Stoxx 50 index closed up 0.09%, Spain's IBEX35 index closed up 0.11%, and Italy's FTSE MIB index closed up 0.32%.

Market Focus

1. Powell: Reaffirm the beginning of the process of falling inflation. The continuous strengthening of employment data makes it necessary to raise interest rates more to cool inflation, and the peak interest rate may also be higher than expected.

2. Microsoft officially introduced ChatGPT into Bing: it can improve the search content and write email by typing code. Microsoft's intraday market value once returned to $2 trillion.

3. The European Central Bank lowered the deposit rate of 20BP to governments in order to drive the latter to gradually withdraw funds.

4. The Federal Reserve of Australia raised interest rates by 25BP and it is expected that further interest rate increases will be required in the coming months.

5. Turkey ordered the resumption of oil transportation to the terminal of Ceyhan Port.

6. Governor of the Bank of Canada McLean: The Bank of Canada needs to suspend interest rate hikes to avoid excessive economic slowdown.

7. In order to oppose the pension reform aimed at raising the retirement age, more than 750,000 French participated in the third nationwide protest.

8. The earthquake killed more than 7,000 people in Turkey and Syria. The Turkey stock index triggered the circuit breaker mechanism twice in the afternoon yesterday, down 9%.

9. Federal Reserve hawk Kashkari: The labor market is overheating, or forcing interest rates to remain at a higher level for a longer time. The terminal interest rate is still expected to be 5.4%.

10. As of this morning, the interest rate futures market is fully priced. The Federal Reserve will raise interest rates by 25 BP in March, reach the peak of 5.15% in July, and have 33 BP interest rate reduction space by the end of the year. Another trader used $17 million to bet that the Federal Reserve would raise interest rates to 6%.

Geopolitical Situation

Conflict Situation:

1. Ukrainian officials: The Russian army reinforces to the eastern part of Ukraine, and may launch a full scale attack at any time after February 15.

2. British military intelligence agency: since the beginning of January 2023, Russia is very likely to try to restart major offensive operations in Ukraine.

3. The Ukrainian Supreme Rada (Parliament) voted to extend the wartime status for 90 days.

4. Russian Defense Minister: In January this year, Ukraine lost more than 6,500 military personnel, 26 aircraft, 7 helicopters, 208 unmanned aerial vehicles, 341 tanks and other armored vehicles and 40 MLRS multiple rocket launch systems. The Russian army destroyed all weapons and equipment provided by the West to Ukraine, including transportation routes and combat positions.

5. Secretary of the National Security and Defense Commission of Ukraine: Russia's new offensive may include an attack on Kharkov or Zaporoge. (Speaking of attacking targets in Russia) If there are Russian facilities that cause damage to our country, we must destroy them.

Assistance Situation:

1. According to the American financial media Business Insider, the German government will approve two domestic defense companies to provide 187 “Leopard 1” tanks to Ukraine.

2. CEO of Rheinmetall: It is expected to provide 20-25 “Leopard 1” tanks to Ukraine this year, and the remaining 88 “Leopard 1” tanks will be delivered in 2024.

3. The relevant officials said that the United States would sell $10 billion worth of Hamis system and ammunition to Poland.

Institutions Perspective

01

Goldman Sachs

The strong rebound of US stocks in the past month may be the best one this year. However, rising valuations, low corporate profits and rising interest rates mean that there is little room for the stock market to rise.

02

SOCIETE GENERALE：EURUSD for a long time bullish

After the market interpreted the European Central Bank's interest rate decision in February as dovish, the rise of the  EURUSD stopped abruptly. Economists from SOCIETE GENERALE pointed out that in the long run, the euro still points upward against the dollar. Technically, the possibility of further profit taking cannot be ruled out. The European Central Bank may try to correct the dovish interpretation of the market's interest rate decision and statement in February, which may attract euro buying, but confidence may remain low until the US CPI is released next week. Due to the improvement of its own terms of trade, the boost of China's economic growth, the narrowing of the policy interest margin of the Federal Reserve/European Central Bank and the attractive valuation, the long-term trend of EURUSD is still inclined to rise. The main downside risks are the new offensive launched by Russia against Ukraine, the further deterioration of relations between Russia and the West and the interruption of energy supply in Europe.

03

MUFG：The dollar has recovered most of its decline since the beginning of the year

MUFG Financial Group said in a report that the US dollar continued to strengthen and reached its highest level against a basket of currencies in nearly four weeks after the release of the better-than-expected US employment data last Friday, as the US economy looked more resilient and there might be more interest rate hikes. 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.