Mohicans markets：MHM Today’s News

MHMarkets-December 21, 2022-Fundamental Reminder

☆ 21:30 Canada publishes monthly rate of CPI for November.

☆ 21:30 U.S. current account for the third quarter.

☆ 23:00 The U.S. published the consumer confidence index of the Conference Board for December.

☆ 23:30 U.S. releases EIA crude oil inventories, EIA strategic petroleum reserve stocks for the week ending Dec. 16. API crude oil inventories decreased by 3.069 million barrels for the week, compared with the expected decrease of 167,000 barrels and the previous increase of 7.819 million barrels.

☆ Russian President Vladimir Putin will chair a defense conference on Dec. 21 to summarize the army's operations and armed forces construction in 2022 and set tasks for 2023.

☆ According to CNN, Ukrainian President Zelensky plans to visit the U.S. White House and meet with President Joe Biden on Wednesday.

MHMarkets -Market Overview

Review of Global Market Trend

The Bank of Japan announced on Tuesday (December 20)that it had doubled the upper limit of the 10-year government bond yield, a sudden policy adjustment that shocked the market, with the dollar plunging nearly 5% against the yen during the day, once falling below 131. the dollar index was dragged lower throughout the day, falling below the 104 mark at the beginning of the U.S. session, closing down 0.69% at 103.95.

The Bank of Japan policy adjustment stimulated 10-year Japanese bond yields rose more than 20 basis points to a new high of seven years, approaching a new ceiling of 0.50%, while European and American long bond yields rose sharply for two consecutive days. 10-year U.S. bond yields rose nearly 13 basis points to 3.71%, two-year U.S. bond yields once rose more than 5 basis points to 4.31%. Eurozone benchmark 10-year German bond yields rose for the fifth consecutive day, once up 10 basis points to 2.30%.

Thanks to the decline in the dollar, spot gold broke through $1820 an ounce during the day, closing up more than $30, or 1.69%, at $1817.89 an ounce; spot silver returned to above 24, surging 5.02%, at $24.15 an ounce.

WTI crude oil lost $75 per barrel during the day, Brent crude oil fell 2% to $79 per barrel during the day, but oil prices pulled up again in the U.S. midday session due to the delayed restart of the Keystone pipeline. Finally, WTI crude oil closed up 0.25% at $75.99 per barrel, while Brent crude oil closed down 0.52% at $79.72 per barrel. European natural gas fell for three straight days and fell nearly 8% more during the session, while U.S. natural gas futures extended their intraday losses to 10% as weather forecasts indicated temperatures would pick up after Christmas.

U.S. stocks turned lower several times during the session and eventually closed slightly higher, with the Dow closing up 0.28%, the S&P 500 closing up 0.11% and the Nasdaq closing up 0.01%. Education stocks, gold stocks and oil stocks were mostly stronger. New energy vehicle stocks were the top losers, with Tesla closing down about 8% and closing shares at a new low since November 2020.

European stocks were mixed, Germany's DAX30 closed down 0.42%, the FTSE 100 index closed up 0.16%, France's CAC40 index closed down 0.35%, the Euro Stoxx 50 index closed down 0.23%, Spain's IBEX35 index closed up 0.64%, Italy's FTSE MIB index closed up 0.11%.

Hot spots in the market

1. Putin will host a national defense conference on the 21st.

2. The US Congress proposed a US $1.7 trillion government appropriation bill for fiscal year 2023.

3. American media: Zelensky will visit the United States on Wednesday and meet with Biden.

4. TC Energy postponed the full restart of KEYSTONE oil pipeline, with the latest target set for December 28-29.

5. Nornickel, the largest nickel producer in Russia, considers reducing nickel production by about 10% in 2023.

6. U.S. Senate Majority Leader Schumer: Democrats and Republicans have reached an agreement on the spending bill.

7. Johns Hopkins University: There are more than 100 million confirmed cases of COVID-19 in the United States.

8. [Iran Nuclear Agreement] EU: reached a consensus with Iran that the nuclear agreement must be resumed; Iran: as long as it abides by Iran's red line and supports the resumption of the Iran nuclear agreement; The United States: There is no progress in the Iran nuclear agreement, and it is expected that there will be no progress in the near future.

9. The Bank of Japan raised the target upper limit of bond yield from 0.25% to 0.5%, which triggered market speculation that the Bank of Japan would withdraw from YCC, causing the yen to appreciate more than 600 points. Kuroda, the bank's president, said that the increase in the yield ceiling was not an exit from YCC or a change in policy.

Geopolitical situation

Energy situation:

1. Russian oil transport company: Poland and Germany request to transport Russian oil. 

2. Germany said it would completely stop buying Russian oil in 2023.

3. According to RIA Novosti, the price of natural gas sold by Russia to Belarus will remain unchanged for three years.

4. Deputy Prime Minister Novak of Russia: After the introduction of the price ceiling of natural gas, the EU faces the risk of losing its supply, which may be diverted to other markets.

5. According to local officials, the Russian natural gas export pipeline from Western Siberia to Europe, Urengoi Pomary Uzhgorod, exploded, and the part that exploded has been closed.

6. Gazprom: After the explosion of the natural gas pipeline, we will use alternative lines to transport natural gas.

7. According to Polish News Agency: Polish state-owned oil company said that it would not extend the Russian oil contract that will expire in January 2023.

8. Rosneft said that Kazakhstan had not announced plans to transfer energy products from the Russian port of Ust Luga to Germany.

9. According to Russian media, Russian companies intend to cooperate with Iran in gas turbine technology and establish joint production.

Assistance:

1. Ukrainian Minister of Digital Transformation Fedorov said that Kiev has reached an agreement with Space X to receive tens of thousands of Starlink antennas that provide satellite network services.

2. Market news: The 2023 budget draft of the United States includes 45 billion dollars of additional assistance to Ukraine and increases the power of President Biden of the United States to transfer up to 14.5 billion dollars of defense equipment to Ukraine.

3. The International Monetary Fund has approved a four month plan to help Ukraine maintain economic stability and promote donor financing assistance.

4. The World Bank approved a financing plan totaling 610 million US dollars to address Ukraine's urgent needs.

Food situation:

1. The Deputy Minister of Agriculture Policy and Food of Ukraine, Vysotsky, said on the 20th that the losses caused to Ukrainian agriculture by military operations had reached 40 billion US dollars.

2. The Deputy Foreign Minister of Russia said that he would hold face-to-face talks with representatives of the United Nations on the food agreement in January.

3. According to Ukrainian media: At present, 27 ships are operating at the port in Odessa region of Ukraine, which will load 1 million tons of Ukrainian agricultural products. Two ships carrying 63000 tons of agricultural products are traveling along the food corridor. As of December 19, 80 ships were waiting for inspection in the Bosporus Strait.

MHMarkets-Institutional Perspective

1. Goldman Sachs：The Bank of Japan is expected to withdraw from the negative interest rate policy in the next step.

2. SOCIETE GENERALE：With the Bank of Japan stimulating hedging, the yen's surge has just begun.

Bank of France said that Bank of Japan Governor Kuroda announced on Tuesday that he would double the maximum yield of 10-year government bonds. This sudden policy adjustment shocked the market and also increased the pressure of international investors in the country to hedge their foreign assets, which is expected to further push up the yen exchange rate. Juckes, the chief foreign exchange strategist of Societe Generale Bank, said that as Japanese fund managers gradually adapt to the Bank of Japan's tougher stance, the dollar/yen exchange rate may fall to 125 in January next year, and the currency/yen exchange rate fell more than 3% on Tuesday, which means that the yen will rise 6% more than the current level in the future.

3. MUFG：The Federal Reserve alone cannot reverse the bearish trend of the dollar.

Economists at Mitsubishi UFJ said the Federal Reserve was unlikely to reverse the bearish trend alone. After the hawkish statement issued by the Federal Reserve overnight, the dollar remained strong for the day. However, Mitsubishi UFJ believes that the Federal Reserve will again slow down the pace of interest rate increase to 25 basis points in February next year. The hawkish policy update of the Federal Reserve will provide more support for the dollar in the short term, but since the CPI fell back in October, the downward trend of the dollar is unlikely to be reversed by the Federal Reserve alone.

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