MHMarkets：October 23, 2023--Fundamental Reminder

22：00  EUR Consumer Confidence Flash (OCT)

There is less fundamental market data today, please pay attention to the stock market opening time risk.

Market Overview

Review of Global Market Trend

On Friday, the dollar index remained rangebound above the 106 mark before closing down 0.07% at 106.16. Treasury yields rose and then fell, with the yield on the 10-year Treasury flirting with the 5% mark and rising as high as 4.99% before easing to close at 4.914%. The yield on the two-year Treasury note closed at 5.071%. The US 2/30-year Treasury yield curve briefly turned positive for the first time since May.

Spot gold rose sharply in U.S. trading, reaching an intraday high of $1,997.23, its highest since May, before falling back to end up 0.36% at $1981.45 an ounce, a second weekly gain. Spot silver closed up 1.36% at $23.36 an ounce, its second straight weekly gain.

Crude oil remained rangebound in early trading, but eased in U.S. trading. WTI crude briefly approached the $90 mark, but fell back to near $88 in U.S. trading before settling down 0.95% at $88.28 a barrel, while Brent crude fell 0.65% to $92.32 a barrel.

The three major U.S. stock indexes fell for a third straight day, with the Dow Jones Industrial Average down 0.86%, the Nasdaq down 1.53% and the S&P 500 down 1.26%. Star tech stocks fell broadly, with Tesla down nearly 3.7%, adding to Thursday's 9% drop, and Apple down 1.4%. The Nasdaq China Golden Dragon Index fell 1.37%, with JD.com falling 2.7% and Alibaba falling more than 2%.

Major European stock indexes fell sharply, with Germany's DAX30 closing down 1.64%, Britain's FTSE 100 down 1.3% and the Euro Stoxx 50 down 1.61%.

Market Focus

1. Fed Bostic doesn't see the Fed cutting rates until the middle of next year. Late 2024 could be the time for the Fed to cut rates.

2. Federal Reserve semi-annual Financial Stability Report: Persistent inflation may pose financial risks.

3. Jim Jordan lost his nomination for speaker of the House of Representatives last Friday after a closed-door vote by Republican lawmakers. Republicans in the US House of Representatives have announced their nine candidates for speaker of the House of Representatives, and the election will begin on Tuesday.

4. According to the Interfax news agency, Russian Deputy Prime Minister Alexander Novak has ordered a study of the possibility of banning kerosene exports.

5. UK media: The EU is considering extending gas price caps to avoid a winter crisis.

6, Nikkei: The BOJ has started discussing the possibility of adjusting its YCC again.

Institutional Perspective

01

CICC

【CICC：5% interest rate on U.S. bonds is reasonable pricing】

CICCresearch pointed out that the US economic data was better than expected, and the 10-year US Treasury yield broke through 5%. Based on the current economic fundamentals, the 5% interest rate is reasonable pricing.

History shows that in the upward phase of the financial cycle, the impulse of credit expansion is stronger, coupled with frequent supply shocks after the epidemic and rising inflation risks, the monetary tightening required is stronger, and the upward pressure on market interest rates is greater. One possibility cannot be ruled out that the 5% US bond interest rate is the new normal in the future. This state is not separated from fundamentals, but the result of financial cycle fluctuations and supply-side structural changes, and is also a law of global political, economic and social development at this stage.

02

Bank of America

【Bank of America：The Fed may end quantitative tightening once overnight reverse repos approach zero】

The Fed's overnight reverse repurchase agreements outstanding have fallen faster than expected, shedding more than $1 trillion since they began in June. If the rapid outflows continue, it would be a sign that excess liquidity is being removed from the financial system, Bank of America strategists Mark Cabana and Katie Craig said. That could give the Fed room to stop so-called quantitative tightening. Quantitative tightening has also been draining liquidity from the financial system as the program stops buying new bonds to replace maturing ones. “The Fed wants overnight reverse repos near zero,” Bank of America strategists wrote in a note to clients on Friday. “Quantitative tightening should stop shortly after overnight reverse repos approach zero.”

03

WELLS FARGO

【WELLS FARGO：It's going to be a rough ride, so buckle up】

“It's going to be a rough ride, so buckle up,” Mike Schumacher, head of macro strategy at Wells Fargo Securities, said on Bloomberg Television this week. “I think interest rate volatility is likely to remain fairly elevated at least through the middle of next year and maybe longer, with the instability largely influenced by issues in the Middle East and the lack of clarity in the market about Fed policy.”

The ICE BofA MOVE Index, which tracks expected Treasury yield moves based on the price of one-month options, has risen for five straight weeks. Indeed, by one measure, the volatility of long-term yields has exceeded that of the stock market by the most in at least 18 years, according to data compiled by Bloomberg.