May 31, 2023 - Fundamental Reminder

☆ 09:30 CNY Manufacturing PMI (MAY)

The market expects China's manufacturing PMI to rise to 49.4 in May from 49.2 in the previous month.

☆ 16:00 EUR ECB Financial Stability Review

The central bank warned in its semi-annual report at the end of last year that financial stability risks in the Eurozone are rising due to high inflation and a gloomy economic outlook.

☆ 22:00 USD JOLTs Job Openings (APR)

The market is now expecting U.S. JOLTs job openings to fall for the fourth consecutive month in April, reaching the lowest level in two years, highlighting that labor tensions that have helped push up inflation over the past year are gradually easing.

☆ The U.S. House of Representatives will reportedly hold a procedural debt ceiling deal vote on Wednesday at 3:30 p.m. (3:30 a.m. BST Thursday). U.S. House Speaker McCarthy said Republicans could easily vote for the debt ceiling bill. U.S. Rep. Massie, a Republican and key figure in the debt ceiling bill push, also said he expects to vote in the House Rules Committee in favor of a bill to suspend the debt ceiling.

Market Overview

Review of Global Market Trend

On Tuesday, boosted by the dollar and U.S. bond yields fell, spot gold fell before rising, intra-day gains once expanded to 1%, above the $1960 mark, and finally closed up 0.82% at $1958.83 per ounce. Spot silver rebounded relatively weakly, eventually closing down 0.04% at $23.18 per ounce.

The dollar index retreated from a two-and-a-half month high to a low of 103.88 as the market was broadly optimistic about the U.S. debt ceiling deal, with the final decline narrowing to 104.06. In addition, news of a meeting of Japanese officials pushed the yen higher, with the dollar falling nearly 0.5% against the yen during the day, losing ground to the 140 mark. U.S. Treasuries extended gains, with the 10-year U.S. bond yield touching a one-week low at 3.699%.

International crude oil sank sharply as spot markets showed supply was far enough to meet weak demand and mixed messages from major oil producers overshadowed the supply outlook ahead of this weekend's OPEC+ meeting. WTI crude oil pushed down near the 69 handle during the session, plunging 5% at one point before finally closing down 4.5% at $69.61 per barrel; Brent crude closed down 4.21% at Brent crude oil closed down 4.21% at $74.03 per barrel.

The three major U.S. stock indexes closed mixed, the NASDAQ rose 0.32%, the S&P 500 index closed flat, the Dow fell 0.15%. Most of the large technology stocks rose, popular Chinese stocks in general, Tesla rose more than 4%, Nifty rose more than 3%, Nvidia rose about 3%, the market value broke trillion, the share price soared 180% in the year; MicroBlog fell more than 7%, Tencent Music and iQIYI fell more than 6%, Pinduoduo and Netease fell more than 5%.   

European stocks across the board, Germany's DAX30 index closed down 0.27%; FTSE 100 index closed down 1.38%; Europe's Stoxx 50 index closed down 0.66%.

Market Focus

 1. Debt Ceiling Bill - A key Republican member of the House Rules Committee will support the bill, the vote may advance, some lawmakers have submitted amendments, and Treasury cash is back up to $54.5 billion.

2. U.S. media: Biden advisers through Oman to understand whether Iran is willing to limit its nuclear program and what it needs to get in return.

3. Federal Reserve Barkin: once inflation subsides, the U.S. economy may support interest rates at a “neutral, normal level” rather than pushing to a level close to 0.

4. Nvidia market value exceeded trillion shares soared 180% in the year.

5. International oil prices fell below $70 as the market showed signs of sufficient supply.

6. Japanese financial authorities held a joint meeting not on the agenda on the afternoon of the 30th, denying it was for yen weakness.

7. Russian Deputy Prime Minister Novak is reported to have discussed the oil market situation with oil companies on the 30th.

8. Iran and the International Atomic Energy Agency are reported to have reached a settlement on two disputes over the nuclear program.

9. The U.S. S&P/CS 20 Large Cities Home Price Index recorded a -1.1% annual rate in March, ending a trend of growth since May 2012.

10. Dry weather pushed U.S. wheat prices below corn prices for the first time since 2013.

Geopolitical Situation

Conflict Situation

1. Military administration in Kyiv, Ukraine: The Ukrainian air force has destroyed more than 20 drones during Russia's assault on Kyiv.

2. Vladimir Putin: Air defense systems around Moscow will be strengthened today after a drone attack on the Ukrainian military intelligence headquarters two or three days ago. Russia's Foreign Ministry said it had the right to take the harshest measures in response to drone attacks. The Ukrainian side has denied Kyiv's involvement in drone strikes on Moscow and predicted such attacks would increase.

3. Russia's defense minister said Russian forces recently hit another Patriot air defense system in Kyiv.

4. The governor of Belgorod Oblast, Russia, said a makeshift shelter for evacuated residents in the state had been shelled by Ukrainian forces.

5. The Russian Defense Ministry released a war report on May 30, saying that Russian forces had struck the central decision-making command post of Ukraine in the last 24 hours, hitting all scheduled targets.

6. According to TASS: The Russian Defense minister said that Russian forces intercepted 29 Storm Shadow missiles this month.

Assistance Situation

1. Russia's defense minister said Western demands that Ukraine turn to a “massive offensive” were intensifying supplies of equipment and weapons to Ukraine.

2. Stoltenberg, NATO Secretary General: At the Vilnius summit, I expect a plan to help Ukraine transition from Soviet-era weapons to weapons that meet NATO standards.

3. Korean media: Zelensky urged South Korea to provide defense systems.

4. The latest U.S. aid package for Ukraine, worth $300 million, includes drone munitions, according to the Associated Press.

Energy Situation

1. Russian oil production remains elevated three months after pledging to cut production.

2. Published data showed that Kazakhstan exported more oil to the European Union in the first quarter of 2023 than in the same period last year, displacing some Russian oil supplies.

3. Market news: Russia plans to boost sea-based diesel exports by a third in June.

4. Market news: Russian Deputy Prime Minister Alexander Novak will discuss the oil market situation with oil companies on May 30.

5. Ukraine will raise electricity bills starting June 1, the country's minister said.

6. Ukraine's state energy company: About 70% of Ukraine's energy facilities damaged by the attack have been repaired.

Institutional Perspective

01

Goldman Sachs

A new round of cuts at Goldman Sachs (GS.N) will involve fewer than 250 jobs and could affect managing directors and top executives.

02

SOCIETE GENERALE

The BOJ is expected to raise its target range for 10-year government bond yields by 50 basis points to 1% at its next meeting.

03

MUFG

MUFG: Market focus shifts to Fed rate hike after tentative US debt ceiling deal

May 30, Mitsubishi UFJ currency analyst Lee Hardman said in a note, as the United States reached a preliminary agreement on the debt ceiling, the market shifted to focus on Friday's U.S. jobs data and the prospect of further interest rate hikes by the Federal Reserve. A strong non-farm payrolls data on Friday would reinforce market expectations for a Fed rate hike in July and strengthen the dollar in the near term.