迈汇MHmarkets: June 15, 2023 - Fundamental Reminder

☆ 10:00 CNY Total Retail Sales of Consumer Goods YoY (MAY) & Above-Scale Industrial Added Value YoY (MAY)

☆ 20:15 EUR ECB Interest Rate Decision

☆ 20:30 USD Initial Jobless Claims (JUN/10) & USD Retail Sales MoM (MAY) & USD NY Empire State Manufacturing Index (JUN), etc.

☆ 20:45 EUR ECB President Lagarde Press Conference

☆ 22:30 USD EIA Natural Gas Stocks Change (JUN/09)

Market Overview

Review of Global Market Trend

The Fed suspended its rate hike early Thursday morning as expected, but the dot plot hinted at 2 more rate hikes of 25 basis points each during the year, which was more hawkish than the market had expected. However, as the PPI data released last night hit a new low since December 2020, the dollar index fell through the 103 barrier to 102.66 before the Fed's interest rate resolution, and after the more hawkish dot plot was released, the dollar index rebounded sharply, barely recapturing the 103 barrier to close 0.27% lower at 103.03.

U.S. bond yields continued to fall before the interest rate resolution, two-year U.S. bond yields once lost 4.6%, but after the resolution was announced, the two-year U.S. bond yields spiked 18 basis points to 4.8%, but then erased most of the gains to close at 4.69%; 10-year U.S. bonds failed to reverse the decline, falling from 3.82% to 3.79% during the day.

Spot gold benefited from the dollar and lower U.S. bond yields before the resolution boosted, once up more than $16 and above the $1960 mark; but after the resolution was announced from the daily high fell more than $20, once lost the 1940 mark, closing down 0.12% at $1941.25 per ounce. Spot silver continued to move higher after the release of PPI data, once back to the 24 mark, after the interest rate resolution, although retracted some of the gains, but still closed up 1.05% at $23.91 per ounce.

Crude oil was up more than 1% after the IEA raised oil demand expectations, but came under pressure due to the surge in U.S. EIA crude oil inventories. WTI crude oil once regained the 70 mark and closed down 0.88% at $68.65 per barrel; Brent crude oil closed down 0.73% at $73.57 per barrel.

Major U.S. stock indexes were mixed under the suspension of interest rate hikes, with the Dow closing down 0.68%, the S&P 500 closing up 0.08% and the Nasdaq closing up 0.39%. New energy vehicles for the third consecutive day higher, ideal car closed up about 7%, Xiaopeng car closed up about 5%, Faraday Future closed up about 5.7%. Tesla closed 0.74%, ending a streak of 13 consecutive trading days of gains.

European stocks closed higher across the board, Germany's DAX30 index closed up 0.50%; Britain's FTSE 100 index closed up 0.11%; France's CAC40 index closed up 0.52%; Europe's Stoxx 50 index closed up 0.66%; Spain's IBEX35 index closed up 1.03%; Italy's FTSE MIB index closed up 0.91%.

Market Focus

1. The Fed suspended rate hikes, but the dot plot hinted at two more rate hikes this year and four to five rate cuts by the end of next year. Powell again tried to override expectations of a rate cut this year and said he discussed cutting rates in the next few years. As of this morning, the market expects the Fed to raise rates in July with a probability of 62%, the implied rate peaks at 5.27, and the probability of one rate cut by the end of the year is about 30%.

2. The Wall Street Journal: U.S. Secretary of State Blinken has had several secret meetings with Iranian diplomats, with the former aiming to curb Iran's nuclear program as well as secure the release of prisoners in Iran.

3. The Panama Canal is experiencing its worst drought in more than 70 years, affecting international logistics.

4. The Federal Reserve will announce the results of its annual bank stress test on June 28.

5. IEA Monthly Report: Oil demand growth to slow sharply as peak nears.

6. The European Parliament voted to add more security controls to generative artificial intelligence.

7. U.S. PPI recorded an annual rate of 1.1% in May, the 11th consecutive decline and a new low since December 2020.

8. According to Fuji TV: Japanese Prime Minister Fumio Kishida is considering dissolving the House of Representatives on the same day if the opposition submits a no-confidence motion on Friday. 

Geopolitical Situation

Conflict Situation

1. Putin: Russian forces are unlikely to launch an offensive against Kiev at this time.

2. The Russian Defense Ministry issued a battle report on the 14th, Russian forces continue to fight against the U.S. Army in Donetsk, Red Liman, Kherson, Kupyansk and other multiple directions, saying that the U.S. Army continues to suffer serious losses in manpower and military equipment and that the U.S. Army's offensive has not been successful.

3. The Ministry of Defense of Ukraine said that the Ukrainian army launched an offensive in several directions on the Eastern and Southern fronts to engage in heavy fighting with the Russian side, and made some progress on the battlefield.

4. The Ukrainian military says a Russian missile attack on the Black Sea port of Odessa killed three people.

5. Belarusian leader said Belarus has started receiving tactical nuclear weapons from Russia.

6. The Ukrainian Air Force shot down three Caliber missiles and nine Shahid-136 suicide drones fired by Russian forces.

7. The General Staff of the Armed Forces of Ukraine said that yesterday Russian troops lost 680 military personnel, as well as 8 tanks, 11 armored vehicles and 17 artillery pieces of equipment.

8. Russian Defense Ministry: Ukrainian weapons and reserve units were targeted in the overnight attack.

The Kremlin: It is not currently considering changing the status of what it calls Russia's “special military operation” in Ukraine. A country or group of countries may have blown up the Nord Stream gas pipeline.

10. NATO Secretary General Jens Stoltenberg: The counter-offensive in Ukraine is still in its early stages.

Food Situation

1. According to TASS: Russian President Vladimir Putin discussed the supply of fertilizers, wheat and fuel in a telephone conversation with the President of Mali.

2. Kremlin: Russia's “goodwill” in renewing the Black Sea grain agreement cannot last forever. The NATO Vilnius summit will make it clear that the future of Ukraine lies with NATO. Ministers are expected to decide on Friday to increase the allies' ammunition stockpile targets. Sweden may join NATO before the Vilnius summit.  

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: The Fed is expected to keep interest rates unchanged in order to clarify risks before raising rates again, with downside risks to the economy weakening, and is expected to raise its 2023 GDP forecast to 1% and raise its terminal rate forecast by 25BP.

02

SOCIETE GENERALE

Market doubts about the Fed's rate hike in July are expected to make the EURUSD rise.

03

MUFG

【Mitsubishi UFJ: GBP May Continue to be Supported by Rate Hike Bets】

On June 14 -- The GBP should continue to be boosted in the short term by market expectations that the BoE will raise interest rates further following yesterday's strong payroll growth data. Mitsubishi UFJ analyst Derek Halpenny said in a report, “We have previously thought that the BoE will raise rates twice more to 5.00% by August, and the wage data released yesterday will certainly make this likely.” Other data was more mixed, with GDP up 0.2% in April from a year earlier, but weaker-than-expected manufacturing and industrial output figures. Halpenny said the GBP should remain well supported in the near term, even though interest rate expectations look too high.