Mai hui MHmarkets: July 20, 2023 - Fundamental Reminder

☆07:30 Japan's June core CPI annual rate

At 10:00 pm, the Ministry of Human Resources and Social Security held a press conference

11:00 National Development and Reform Commission holds a press conference

☆The total number of oil wells drilled in the United States from 01:00 the next day to the week of July 21

Market Overview

Review of Global Market Trend

The number of people applying for unemployment benefits for the first time announced last night did not increase, but decreased, indicating that the labor market is still flexible and may support the Federal Reserve to continue to raise interest rates this year. The U.S. Dollar Index was boosted by this and closed up 0.61% to 100.85. Due to the central bank and the State Administration of Foreign Exchange raising the macro prudential adjustment parameters for cross-border financing to 1.5, the offshore RMB surged by over 500 points.

The US Treasury yield rose by over 10 basis points during the session, and the two-year US Treasury yield approached 4.88% during the session, closing near 4.84%; The 10-year US Treasury yield rose by over 12 basis points during the session, rising from 3.75% to 3.85% within the day.

Spot gold, affected by the rise in US dollar and US bond yields, fell from an eight week high and briefly fell over $20 during the day. It failed to close at the 1970 US dollar level and closed 0.38% lower at $1969.55 per ounce; Spot silver fell sharply, taking back all its gains since last Friday and closing down 1.6% at 24.75.

Boosted by China's record high crude oil imports from Russia in June, the US and Brent crude oil rose by over 1%, WTI crude oil closed up 0.44% at $75.67 per barrel, Brent crude oil closed up 0.17% at $79.57 per barrel, but still failed to close the $80 barrier.

The US stock market saw mixed gains and losses, with the Dow Jones Industrial Average closing up 0.47%, the S&P 500 Index closing down 0.67%, and the Nasdaq plummeting 2.05%. Tech stocks suffered overall losses, with Tesla and Netflix closing down 9.7% and 8% on their first trading day after performance. The trillion dollar market cap team also dragged down the market. Nvidia closed down 3%, Apple fell 1%, and Google and Microsoft fell 2%. The Nasdaq China Golden Dragon Index closed 0.6% lower.

The main indexes of European stocks closed higher, with Germany's DAX30 index up 0.60%, Britain's FTSE 100 Index up 0.75%, and Europe's Stoxx 50 index up 0.25%.

Market Focus

1. India implements a ban on rice exports, affecting 10 million tons/year of exports.

2. Biden set up a Debt limit team to find a way to end the deadlock.

3. The central bank of Türkiye raised the interest rate by 250BP to 17.5%, which was 20% lower than the market expectation.

4. Japan, the United States, and South Korea plan to hold a summit meeting in the United States on August 18th, which will confirm cooperation among the three countries.

5. The Nasdaq closed down 2% overnight, while Tesla, whose verbal performance guidance was not accepted by the market, fell nearly 10%.

6. American media: The iPhone 15 series may face a shortage of supply when it is released in September to achieve narrower borders.

7. The Federal Reserve has announced that its real-time payment system, FedNow, has been launched, making it difficult to shake the credit card status.

8. Insider: FTC has suspended internal hearings on the acquisition cases of Microsoft and Activision Blizzard, opening the door for settlement negotiations.

The European Central Bank has made significant adjustments to the stress testing of banks, increasing capital requirements from approximately 3.5 percentage points to approximately 5 percentage points.

The Japanese government expects overall inflation to reach 2.6% in the current fiscal year, exceeding the Bank of Japan's 2% target; Reduce the economic growth forecast for this fiscal year to 1.3%.

Geopolitical Situation

Conflict Situation

1. Zaporizhzhia: The Ukrainian army is planning to carry out an action to forcibly cross the Dnieper and occupy the Zaporozhe nuclear power plant at the end of July.

2. According to Ukrainian TSN TV station: Armed Forces of Ukraine Army Commander Sergei, all the conditions for the liberation of Bakhmut have been met, and the Russian army has been semi surrounded.

3. Officials in Wudang say that Russia attacked Nikolayev, causing at least 9 injuries and an unknown number of deaths. Odesa, Ukraine, was attacked by Russia.

4. According to RIA Novosti: Natalia Humeniuk, spokesman of the Ukrainian Army's Southern Operations Command, said that the logistics facilities and an administrative building in Odesa Oblast State were damaged by the explosion.

According to Russian news agency: Local officials say Ukraine attacked Crimea with drones, resulting in one death and four buildings being damaged.

6. According to TASS: The Russian Ministry of Defense said that Russia continued to carry out “retaliatory strikes” against Ukraine, attacking the targets of Odesa and Nikolayev.

Food situation

1. The Ukrainian Ministry of National Defense stated that starting from July 21st, all ships heading to ports occupied by Russia in the Black Sea of Russia and Ukraine may be considered as potential military cargo transport ships.

2. German Foreign Minister Berbok: Efforts will be strengthened to ensure that Ukrainian grains can be transported out by train and should not be used as weapons.

3. Source: Russia lifted the restrictions on the navigation of cargo ships passing through the Kerch Strait.

4. Olivia Dalton, Deputy Press Secretary of the White House: According to the information provided by Russia and other sources, Russia has not only been attacking the Black Sea ports, but also indicated that they are preparing to attack civilian ships in the Black Sea Region.

Sanctions

1. The US Treasury Department statement: New sanctions will be imposed on Russia, with the goal of obtaining battlefield supplies and revenue sources, as well as Russia's future energy production and export capabilities.

2. State Department statement: The United States is imposing sanctions on nearly 120 entities and individuals in Russia to weaken Russia's current and future military capabilities.

Australia claims to impose further sanctions on Russia.

4. The EU's sanctions against Russia have been extended for 6 months until January 31, 2024.

5. Spokesperson of the Russian Ministry of Foreign Affairs: The sanctions imposed by the European Union on Russia's agricultural industry have had a devastating impact on the food safety situation.  

Institutional Perspective

01

Goldman Sachs

Goldman Sachs: Expecting Consumption to Continue Supporting the US Economy

Goldman Sachs economists stated in a report that consumer spending remains the “source of strength for the US economy”. They predict that actual expenditures will increase by 1.4% and 1.6% in the third and fourth quarters, respectively, resulting in an overall growth rate of 2.2% in 2023. With employment and wages remaining strong and Disinflation slowing, Goldman Sachs expects real disposable income to grow slightly less than 4% this year. Economists say that an increase in wealth will provide spending protection for households affected by negative economic shocks.

02

SOCIETE GENERALE

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

03

MUFG

MUFG：It is understandable that USD/JPY has regained lost ground

July 19 - BOJ Governor Kazuo Ueda's latest speech partly triggered a new rally in US DOLLAR/YEN. MUFG economists said Mr. Ueda acknowledged that market functioning had improved, but that the decision to adjust YCC would be based more on fundamentals than market functioning at this critical juncture. The market's reaction to Ueda and Noo's comments suggests that speculation of a YCC adjustment next week has diminished. But we think the BOJ's economic projections next week will provide a case for adjusting the YCC. And when there is no upward pressure on yields, not yet threatening the 0.5% range ceiling, it is an ideal time to adjust YCC. Key will remain Friday's Japanese CPI data, which could once again trigger another round of speculative pricing in the market. But USD/JPY has understandably regained some ground against the backdrop of improving risk appetite and softlanding optimism.