MHMarkets：August 30, 2023 - Fundamental Reminder

☆ 09:30 AUD Inflation Rate YoY n.s.a (JUL)

☆ 17:00 EUR Industrial Sentiment (AUG) & EUR Consumer Sentiment Final (AUG) & EUR Economic Sentiment (AUG)

☆ 20:15 USD ADP Employment Change(AUG)

☆ 20:30 USD GDP Growth Rate QoQ 2nd Est (Q2)

☆ 22:00 USD Pending Home Sales MoM (JUL)

☆ 22:30 USD EIA Crude Oil Stocks Change (AUG/25) & USD EIA Strategic Petroleum Reserves Change (AUG/25)

Market Overview

Review of Global Market Trend

A series of economic data about the United States announced on Tuesday night are not as good as expected. The dollar index took a dive, closing down 0.45 % at 103.48, as bets increased that the Fed would pause in September and that the odds of a resumption in November would decline.

Treasury yields fell about 10 basis points  to a completely fresh low in two weeks. The yield on the two-year Treasury note, which is sensitive to monetary policy, fell as much as 16 basis points from its session high to break above 5% and 4.9%, erasing all gains since August 14. The yield on the 10-year Treasury note fell as much as 14 basis points from its session high to close at 4.12%, erasing all gains since August 11.

Spot gold benefited from weakness in the dollar and Treasury yields, rising more than $20 from the day's low to settle up 0.9 % at $1,937.43 an ounce. Spot silver jumped by 1.95%  in U.S. trading closed at $24.7 an ounce,a new high in nearly a month.

As a tropical storm was upgraded to a hurricane and could reach the Gulf Coast on Wednesday, causing power outages and affecting production, crude oil reversed losses in U.S. trading session. WTI crude fell below $80 before regaining it and closing up 1.66% at $81.28 a barrel. Brent crude fell as low as $83.27 a barrel before rallying to end up 1.39% at $84.95 a barrel.

The three major U.S. stock indexes closed pretty high. The Dow Jones Industrial Average closed up 0.85%, the Nasdaq gained 1.74% and the S&P 500 gained 1.49%. VinFast, a Vietnamese electric-vehicle maker, tumbled 43%. Tech stocks were broadly strong, with Tesla up 7.6% and Apple, which is set to release a new phone, up more than 2%. Chinese stocks outperformed the market again, with the Nasdaq China Golden Dragon Index closing up 3.7%, PDD up more than 15% after its performance, and Li Auto, Beiche and Bilibili all closing in the 7%.

Major European stock indexes all closed higher. Germany's DAX30 index closed up 0.90%, Britain's FTSE 100 index rose 1.76% and Europe's Stoxx 50 index rose 0.81%.

Market Focus

1. The JOLTs job openings in the US recorded 8.827 million in July, well below market expectations of 9.4-9.5 million; Markets have brought forward the timing of a full Fed rate cut from July to June next year. Nick Timiraos, commenting on the data, says the Fed likes it.

2. Apple will hold a new product launch event at 1:00 am Beijing time on September 13.

3. American Petroleum Institute (API) data showed US crude oil stocks change fell by about 11.5 million barrels last week.

4. A US court gave Grayscale approval to launch the first spot bitcoin ETF in the US, overturning the SEC's decision.

5. An overview of the market - overnight in the stock index up 3.7%. Tesla and Nvidia closed up more than 7% and 4%, respectively, while VinFast closed down more than 43%. Treasury yields fell about 10 bp, the currency rose by more than 7%.   

Geopolitical Situation

Conflict Situation

1. Russian Defense Ministry: Two Ukrainian drones destroyed by air defense systems in Tula region.

2. Russian media: Pskov airport in western Russia has been hit by a drone, causing explosions and fires.

3. Turkish media: Turkish President Recep Tayyip Erdogan plans to travel to Russia in the near future to discuss with Russian President Vladimir Putin an agreement on the export of agricultural products from Black Sea ports.

4. White House: The U.S. will send the next tranche of military aid to Ukraine, worth $250 million.

5. First Deputy Minister of Agriculture: Ukraine's winter wheat acreage likely to remain unchanged despite export crisis.

6. Kremlin: No specific information on plans for Prigozhin's funeral, but Russian President Vladimir Putin doesn't plan to attend.

7. Brazilian Aviation Authority: Russia says it won't investigate the plane crash in Prigozhin under international rules for now.

8. Fumio Kishida, Prime Minister of Japan: President Zelensky of Ukraine has been informed that Japan plans to continue to support Ukraine.

9. According to Ukraine Pravda: The G7 group has not yet agreed on an approach to security guarantees for Ukraine. Preparations for the G-7 to provide security guarantees for Ukraine will take months, with some bilateral agreements not expected until next year.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs：If the BOJ maintains its dovish stance, the yen could fall to 1990 levels within six months.

02

SOCIETE GENERALE

【SOCIETE GENERALE：The dollar remains the most popular currency】

August 24 - Although currency markets are still in the summer doldrums, the US dollar is still the top dog in the market, said Kit Juckes, chief global FX strategist at Societe Generale. In August, dollars all the way higher, and is expected to continue to rise, until the BOJ takes action (They will not meet again until September 22nd). Either European data (unlikely) gets better or US data be weak or Fed officials adopting a more cautious tone at Jackson Hole.

03

MUFG

The BOJ's record pace of bond purchases increases the need to adjust yield curve control policies

August 21 -The BOJ has bought government bonds at a record pace this year, which may be one factor prompting the bank to allow yields to fluctuate in a wider range in the near term, reducing pressure on it to keep long-term rates under control. The BOJ hasn't significantly reduced its bond purchases after widening the yield-curve band in December and last month, and the ramp-up after each change raises questions about whether the central bank is moving too slowly to adjust policy and would have to go too far to stop investors from pushing yields too high. Naomi Muguruma, chief fixed-income strategist at MUFJ Morgan Stanley Securities, said that if the BOJ reduced its bond purchases, market participants would take it as a signal that it was close to exiting its easing policy, pushing yields higher and forcing it to buy more.