Mohicans markets：MHM Today News

February 10, 2023 - Fundamental Reminder

☆ 08:30 The Reserve Bank of Australia releases Statement on Monetary Policy

☆ 09:30 China annual rate of CPI for January 

☆ 15:00 U.K. revision for annual rate of Q4 GDP, U.K. monthly rate of three-month GDP for December, monthly rate of Manufacturing Production for December, seasonally adjusted Goods Trade Balance for December and U.K. monthly rate of Industrial Production for December

☆ 21:30 Canada January Employment

☆ 23:00 U.S. One-Year Inflation Rate Expectations for February, preliminary University of Michigan Consumer Confidence Index for February

☆ The next day 02:00 U.S. total number of oil wells drilled for the Week to Feb.10

Market Overview

Review of Global Market Trend

Data released on Thursday night showed that the number of  U.S. jobless claims had risen, but it was still less than 200,000, which was then interpreted as a major sign of the recovery of the labor market. Coupled with the “hawk” of the Federal Reserve Barkin and the alarm released by the bond market, there was a huge earthquake in the market last night. The US dollar index once fell below the 103 mark during the day, and then continued to rise and closed down to 0.21% at 103.23.

U.S. bond yields soared due to the poor performance of the 30-year U.S. bond auction. 10-year U.S. bond yields rose nearly 5 basis points, rising from 3.61% to 3.66% during the day. 2-year U.S. bond yields rose nearly 8 basis points during the day and traded near 4.48% as of the U.S. close. The degree of inversion between the 2-year and 10-year U.S. Treasury yield curves reached a multi-year high, releasing signals of a possible recession in the next year or so.

After the release of the U.S. initial jobless claims data, spot gold once stood on the $1890 mark; but then opened a precipitous dive, once below the $1860 mark, plunging more than $30 from the daily high; as of the close of trading barely stabilized the 1860 mark, closing down 0.73% at $1861.78 per ounce, stopping three consecutive suns and approaching a low of more than 3 weeks. Spot silver fell below the 22 mark for the first time since late November last year, closing down 1.54% at $21.97 per ounce.

Crude oil stopped for three consecutive days, mainly due to the general risk aversion sentiment in the market. WTI crude oil closed down 1.05% at $77.61 per barrel, while Brent crude oil closed down 1.04% at $84.2 per barrel. The European benchmark TTF Dutch natural gas futures fell more than 1% in the end of the day and fell nearly 3% intraday, still hovering at the low level of one and a half years.

U.S. stocks closed, the Dow closed down 0.73%, the Nasdaq closed down 1.02%, the S&P 500 index closed down 0.88%. Mask concept stocks, Chinese stocks bucked the market higher, iQIYI closed up more than 8%, Alibaba, Tesla closed up 3%.

European stocks closed up collectively, Germany's DAX30 index closed up 0.69%; Britain's FTSE 100 index closed up 0.35%; France's CAC40 index closed up 0.96%; Europe's Stoxx 50 index closed up 0.98%; Spain's IBEX35 index closed up 0.19%; Italy's FTSE MIB index closed up 1.23%.

Market Focus

1. The earthquake killed more than 20,000 people in Turkey and Syria.

2. Russian media: Russia will sell all euro assets of wealth funds this year, and will only hold RMB, ruble and gold.

3. The US Treasury Department imposed sanctions on six Iranian petrochemical manufacturers and their three subsidiaries.

4. The bond market is close to the expected management of the Federal Reserve, and the yield of the US two-year bond has exceeded 4.5% for the first time since November 30 last year.

5. Kraken, the cryptocurrency trading platform, reached an agreement with the SEC to close the cryptocurrency equity pledge business department.

6. The Federal Reserve will conduct a bank stress test in March, including the global economic recession scenario.

7. Federal Reserve Barr: We can't take it for granted that the inflation decline in the past three months can be sustained. There is a long way to go to combat inflation.

8. The Swedish central bank raised interest rates by 50BP to 3%, which was in line with market expectations. Mexico's central bank raised interest rates by 50BP, exceeding market expectations.

9. LME announced the inventory of Russian metals in January: the total inventory of Russian metals accounted for 42%. Rusal accounts for 40.5% of aluminum inventory, 16% of nickel and 94% of copper.

10. People familiar with the matter said that the former deputy governor of the Bank of Japan, Hiroshi Yamaguchi, was nominated for president. If nominating this person will release the signal of policy normalization, the Japanese government may formally nominate it to the Congress on February 14.

Geopolitical Situation

Conflict situation:

1. The British Ministry of Defense: The weather affects the process of the Russian-Ukraine conflict, and the two sides are unlikely to arrange a large-scale attack in the middle of March when the land is extremely muddy.

2. Interfax quoted the Russian Ministry of Defense as saying that the Russian army continued to attack the Donetsk region of Ukraine and four artillery warehouses were destroyed.

3. Ukraine's Kiev Military and Political Administration: An explosion occurred in a factory in Kiev on the same day, killing four people.

4. The Deputy Chief of Staff of the President of Ukraine: We will never sit down and negotiate with Putin on Russian terms. The Eastern European region needs security guarantees.

Energy situation:

1. Insiders said that Russia is ready to change the price evaluation method of its main export crude oil in the oil tax formula to reduce its discount with Brent crude oil. The price of Ural crude oil will be 20-25 dollars/barrel lower than Brent crude oil.

Assistance situation:

1. Prime Minister of Portugal: It is planned to provide three Panther tanks to Ukraine in March.

2. The spokesman of the British Prime Minister: Ukrainian pilots will be trained for the “Typhoon” fighter.

Institutions Perspective

01

Goldman Sachs

We believe that Microsoft is ready to become one of these leaders. In the past two years, Microsoft has proved its ability through GitHub Copilot, Power Apps, Azure OpenAI Services and other products, as well as the recent Team Premium and Viva Sales.

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.