June 8, 2023 - Fundamental Reminder

☆ 07:50 JPY GDP Sales QoQ 2nd Est (Q1)& JPY Balance of Trade (APR)

☆ 17:00 EUR GDP Growth Rate YoY Final (Q1)& EUR Employment Change QoQ s.a (Q1)

☆ 20:30 USD Initial Jobless Claims(JUN/03)

☆ 22:00 USD Wholesale Sales MoM (APR)

☆ 22:30 USD EIA Natural Gas Stocks Change (JUN/02)

Market Overview

Review of Global Market Trend

The Bank of Canada, a hawkish bellweker in the G7, unexpectedly raised interest rates by 25 basis points last night, becoming the first G7 central bank to resume tightening after a pause. The move led to a rise in expectations for a June rate hike, while a July rate hike was also fully priced in. The index fell as low as 103.66 after the Bank of Canada rate hike, before recovering sharply and closing down 0.06 percent at 104.13.

Treasury yields rallied collectively, with the two-year yield rising more than 10 basis points at one point to close near 4.55%; The 10-year Treasury yield rose to near 3.79% from 3.66% during the day.

Spot gold plunged more than $30 after the Bank of Canada rate hike, briefly falling below the $1,940 mark and closing down 1.19% at $1,9441 an ounce. Spot silver briefly rose above the $24 mark before paring gains to end down 0.65% at $23.44 an ounce.

EIA crude inventories unexpectedly fell by 450,000 barrels last week, but gasoline and refined oil inventories both jumped more than expected, raising some demand concerns. But oil continued to rally, boosted by a weaker dollar after the Bank of Canada rate hike, with WTI crude up more than 2% to settle up 1.43% at $72.42 a barrel. Brent crude rose above $77 and closed up 1.13% at $76.77 a barrel.

U.S. stocks closed mixed, with the Dow up 0.28%, the S&P 500 down 0.38 percent and the Nasdaq down 1.29%. On the wall, big tech stocks were broadly lower as traders increased bets that the Fed would raise interest rates, with Microsoft and Google both down more than 3% and Amazon closing down 4.2%. The Nasdaq China Golden Dragon Index closed down 0.92%.

Major European stock indexes were divided, with Germany's DAX30 closing down 0.21%. Britain's FTSE 100 closed down 0.03%; France's CAC40 index closed 0.09% lower; The Stoxx Europe 50 index closed down 0.10%; Spain's IBEX35 index closed up 0.50%; Italy's FTSE MIB index closed up 0.04%.          

Market Focus

1. The dollar rose nearly 8% against the Turkish lira in a single day, with the lira hitting another record low of 23.

2. The Treasury expects its cash balance to be about $425 billion at the end of June; The U.S. posted its largest deficit in six months due to higher imports.

3. The Bank of Canada unexpectedly raised interest rates by 25 basis points to 4.75%, widely expected to remain unchanged. Money-market trading is pricing in another rate increase of about 43BP by the end of the year.

4. OECD: Forecast global GDP growth to slow to 2.7% in 2023. US GDP growth is forecast at 1.6% in 2023. Two “modest” rate cuts are expected in the second half of 2024.

Geopolitical Situation

Conflict Situation

1. Governor of the Kherson region of Ukraine: shelled by Russian troops, one civilian dead.

2. Governor of Russia's Kursk Region: Two residential areas lost power after Ukrainian troops dropped explosives on power stations.

3. According to TASS: Russian-backed authorities imposed a state of emergency in Ukraine's Kherson region.

4. Head of the Office of the President of Ukraine: Russian drones attacked Sumy region, killing two civilians and injuring one.

5. Ukrainian Deputy Defense Minister: In the last 24 hours, Ukraine advanced up to 1,100 meters on some parts of the front line near Bakhmut.

6. Governor of Russia's Belgorod region: Ukraine bombed the village of Glafovka with grenades, part of which landed near the school, with no casualties.

Kahovka Dam Situation

1. Director General of the International Atomic Energy Agency (IAEA): IAEA expert team to visit Zaporozhye nuclear power plant.

2. Russian nuclear power operator Rosenergoatom official: Zaporozhye nuclear power plant is sufficiently protected to resist any attempt to seize it by force.

3. According to TASS: After the destruction, the water level continues to fall. However, it is expected that the rise in water levels in parts of Kherson region will continue for 3-10 days.

4. British Ministry of Defense: In the next few days, the Kakhovka dam may collapse further, triggering more flooding.

5. Russian appointed governor says part of Russian minefields flooded after dam collapse.

6. Russian Defense Ministry: Ukrainian saboteurs detonated the ammonia pipeline of the Togliatti-Odessa pipeline in the Kharkov region on Tuesday. Russian Foreign Ministry spokeswoman Zakharova: It will take 1-3 months to repair the Togliatti-Odessa ammonia pipeline. 

Institutional Perspective

01

Goldman Sachs

Goldman Sachs now expects the Australian Fed to raise rates by 25 basis points in July, August and September, bringing the terminal rate to 4.85%, compared to the previous estimate of 4.35%.

02

SOCIETE GENERALE

【Societe Generale: 10-Year U.S. and German Treasury Spreads Expected to Narrow】

On June 2, Societe Generale interest rate strategists wrote in a report that there is room for a narrowing of the 10-year U.S. Treasury/German bond yield spread, which is consistent with the usual trend around the last Fed rate hike. They said, “Eurozone core inflation has yet to plummet, while the ECB's stance is less restrictive than the Fed's.” They said, “This has helped narrow the spread between U.S. Treasuries and U.S. Treasuries.” The yield spread between 10-year U.S. Treasuries and 10-year German Bonds currently stands at 135 basis points, with the 10-year U.S. Treasury yielding about 3.62% and the 10-year German Bond yielding about 2.27%, according to Tradeweb.

03

MUFG

The boosting impact of strong non-farm payrolls data on the dollar may have been partially dampened.