Mai hui MHmarkets: July 19, 2023 - Fundamental Reminder

☆ 17:00 EUR Inflation Rate YoY Final (JUN) & EUR Inflation Rate MoM (JUN)

☆ 20:30 USD Housing Starts (JUN) & USD Building Permits (JUN)

☆ 22:30 USD EIA Crude Oil Stocks Change (JUL/14) & USD EIA Strategic Petroleum Reserve Inventory (JUL/14)

Market Overview

Review of Global Market Trend

June retail sales data released on Tuesday fell short of expectations, but core sales remained firm. After the release of the data, the U.S. dollar index dived to a 15-month low, and then rebounded as the market fully digested expectations of a 25 basis point rate hike in July, once back to the 100 mark, but failed to hold on to close up 0.05% at 99.96. In addition, the dollar against the Turkish lira rose for three consecutive days to break through the 27 mark, renewed record highs, and the cumulative gains so far this year expanded to 45%.

U.S. bond yields fell collectively after the release of retail sales data, with the market betting that July will be the last rate hike of the Federal Reserve's current tightening cycle. But the U.S. two-year U.S. bond yield turned higher at midday, rising from 4.73% to 4.77% on the day, while the yield on the 10-year-old U.S. bond fell slightly to 3.78% from 3.80%.

Spot gold benefited from the lower dollar index and U.S. bond yields, rising nearly $30 at one point in the session to close up 1.22% at $1978.92 per ounce. Spot silver was back above $25, closing up 0.87% at $25.05 per ounce.

Crude oil also benefited from a weaker U.S. dollar, in addition to the market gauging the likelihood of a tightening of U.S. oil inventories, with WTI crude closing up 2.25% at $75.75 per barrel, and Brent crude pushing up to the $80 mark during the session, closing up 1.73% at $79.72 per barrel.

U.S. stocks extended their gains, with the Dow closing up 1.06%, the S&P 500 closing up 0.73%, and the Nasdaq up 0.76%. Charles Schwab closed up 12% as its Q2 results beat expectations. Microsoft Office AI-assisted tools for B-side pricing reflecting strong market demand and low running costs spurred a 4% jump in shares, with market capitalization reaching a record high of $2.67 trillion. The Nasdaq China Golden Dragon Index underperformed the broader market, closing down 3.2%, with Bilibili and iQIYI falling at the 6%.

All major European stock indexes closed higher, with Germany's DAX 30 closing up 0.35%, Britain's FTSE 100 closing up 0.64%, and Europe's Stoxx 50 closing up 0.31%.

Market Focus

1. The Philippines set up its first sovereign wealth fund with an initial amount of $9 billion.

2. The United Nations Command: an American crossed the border from South Korea into North Korea and has been arrested by the North.

3. The demand for electricity pushed up the price of U.S. natural gas futures as many parts of the world were scorched by high temperatures.

4. U.S. Treasury data: China and Japan in May, respectively, reduced holdings of U.S. debt 22.2 billion U.S. dollars, 30.4 billion U.S. dollars.

5. U.S. retail sales in June recorded a monthly rate of 0.2%, the market expected 0.50%. The data did not weaken the Fed's expectations of a rate hike next week.

6. Microsoft's market capitalization reached an all-time high of $2.67 trillion, and its AI office assistance tool Copilot priced at $30/month per user for the B-end, reflecting the low-cost, high-demand market situation.

Geopolitical Situation

Conflict Situation

1. According to the Kyiv Independent: Ukraine's Southern Combat Command, Russian forces launched drone strikes on the oblasts of Odessa, Nikolayev and Kherson during the night of July 18. A fire broke out in Nikolayev and Odessa port facilities were damaged by Russian air strikes.

2. Russian Defense Ministry: Russia carried out “retaliatory strikes” on the Ukrainian ports of Odessa and Miloraiv, with all targets hit. Russian troops advanced two kilometers toward Kupiansk.

3. According to the Russian news agency, nine drones were shot down in eastern Crimea and 19 were neutralized by electronic combat equipment.

4. Ukraine says it shot down six Russian missiles and 32 drones overnight. Ukraine's Odesa governor: Air defense system repels Russian air strikes for second night in a row.

5. UK Defence Ministry: Russia and Ukraine have made “limited progress” in different areas over the past week. In the northeast, Russian forces are trying to push west, through forests west of the town of Kremina. The Russians may be vulnerable in Bahmut, but for now they can hold it. In the south, Ukrainian forces continued to attack from at least two directions but are unlikely to have broken through the main Russian lines.

Food Situation

1. Kremlin: Russia is in contact with African countries on the issue of food and will have the opportunity to discuss this issue at upcoming Russia-Africa events. Russia's military believes Ukraine is using the food corridors for military ends.

2. Insurance broker Marsh: Ukraine grain insurance program suspended.

3. Russian Foreign Minister Sergei Lavrov discussed ways of exporting grain with his Turkish counterpart.

Institutional Perspective

01

Goldman Sachs

 Goldman Sachs: The BOJ may adjust YCC and Japanese stocks may face near-term headwinds.

02

SOCIETE GENERALE

SOCIETE GENERALE: Tomorrow's UK CPI data may influence the BOE's rate hike.

03

MUFG

MUFG and Morgan Stanley will combine some functions of the Japanese joint venture.