Mohicans markets：MHM Today News

February 9, 2023 - Fundamental Reminder

☆ 15:00 German preliminary monthly rate of CPI for January

☆ 17:45 Bank of England Governor Bailey makes testimony statement

☆ 21:30 U.S. Unemployment Claims for the week to Feb. 4

☆ 23:30 U.S. EIA Natural Gas Storage for the week to Feb. 3

Market Overview

Review of Global Market Trend

Although a number of Fed officials, including the “new king of the hawks” Kashkari, have made tougher speeches, they were not as fierce as Powell's speech before, and the trend of the dollar index was relatively mild. By the end of the day, the dollar index was only up 0.18% at 103.5. U.S. bond yields turned up at the beginning of the U.S. session, but thanks to strong 10-year U.S. bond bids, U.S. bond yields turned down; the 10-year U.S. bond yield fell more than 6 basis points, from 3.67% to around 3.61% during the day. 2-year U.S. bond yields fell nearly 6 basis points at the deepest, and it traded near 4.43% by the end of the U.S. session.

The response of spot gold to the speech of the Federal Reserve officials was also tepid. Even after Kashkari began to speak, it once rose nearly $5 and again reached the 1880 threshold; By the end of the closing day, it had risen 0.2% at $1875.55 per ounce, which was the third consecutive day to reach a new high in a week. Spot silver once pushed down to the 22 dollar mark, closing up 0.72% at $22.32 per ounce.

Crude oil also posted three consecutive gains after three straight losses and recovered most of the ground lost in the previous three days of losses, mainly due to an improved demand outlook and the market's tendency to dovishly interpret Powell's speech; WTI crude closed up 1.15% at $78.44 per barrel and Brent crude closed up 1.18% at $85.08 per barrel. European benchmark TTF Dutch natural gas futures ended the day down more than 1% and fell nearly 5% intraday, continuing to hover at one-and-a-half-year lows.

U.S. stocks closed with the Dow closing down 0.61%, the Nasdaq closing down 1.68%, and the S&P 500 closing down 1.1%. Star tech stocks fell in general, Google A closed down more than 7% due to its highly anticipated AI chatbot Bard giving factually incorrect answers to user questions and Meta Platforms closed down more than 4%; Tesla bucked the market to close up more than 2%.

European stocks mostly closed up, Germany's DAX30 index closed up 0.58%; Britain's FTSE 100 index closed up 0.22%; France's CAC40 index closed down 0.18%; Europe's Stoxx 50 index closed up 0.01%; Spain's IBEX35 index closed up 0.59%; Italy's FTSE MIB index closed up 0.21%.

Market Focus

1. The investigation of the MH17 crash of Malaysia Airlines was suspended.

2. The strong earthquake has killed more than 12,000 people in Turkey and Syria.

3. Japanese media: Japan will relax the entry epidemic prevention measures for Chinese passengers as soon as this month.

4. US Treasury Secretary Yellen: Interest rate increases dragging down the federal budget, but interest rate increases have been included in the budget forecast.

5. Biden's State Message: promised not to default on the debt ceiling, called on Congress to pass the billionaire minimum tax proposal, and proposed to increase the corporate share repurchase tax by four times.

6. According to AFP, the French trade union plans to hold a further strike on February 16.

7. Turkey's stock index triggered the downward circuit breaker mechanism twice in a single day. The exchange suspended and canceled the trading on February 8 and resumed on February 15.

8. The Bank of India continued to raise interest rates by 25 bps to a four-year high, and the GDP growth rate is expected to be 6.4% in fiscal year 2024.

9. Fed official's speech - Williams: The terminal interest rate is 5-5.25%, which is reasonable. The restrictive interest rate needs to be maintained for several years. A 25 bps interest rate increase seems to be the best choice at present, but as appropriate; Kashkari: There is not much evidence that the interest rate increase has affected the labor market, which means that more action is needed. The interest rate will remain unchanged for a long time; Waller : The interest rate may be at a higher level and maintained for a longer time; Cook: We should raise interest rates slightly to curb inflation.

Geopolitical Situation

Conflict Situation:

1. The Russian Satellite News Agency said that the artillery of the western military region of Russia fired daily during the special military operation to prevent the attack of the Ukrainian army.

2. According to TASS, the Russian Ministry of Defense said that the Russian army shot down 10 Ukrainian UAVs and destroyed the UAV repair plant in Kharkov.

3. NATO Secretary General Stoltenberg: There is no sign that Russia is preparing for peace. Moscow is preparing for a new military offensive.

4. Zelensky: Without new weapons, Ukraine's fighting progress will stagnate.

Energy situation:

1. Deputy Prime Minister Novak of Russia: Russia will decide on measures to deal with the sanctions imposed by the European Union on Russian oil products before March 1.

2. Italian Minister of Economy: The government is studying new measures to help families and companies cope with expensive energy bills.

Assistance Situation:

1. Mr. Zerensky arrived in Britain and France successively and met with political leaders of European countries.

2. German Defense Minister: 14 Leopard 2 tanks will be supplied to Ukraine by the end of March.

3. The defense ministries of Germany, the Netherlands and Denmark said in a joint statement that they would invest funds to repair at least 100 “Leopard 1” tanks in the inventory of military enterprises and deliver them to Ukraine within a few months.

4. British Prime Minister Sunak: It is not ruled out to provide military assistance to Kiev in any way, including providing jet fighters and long-range missiles. The first step in providing advanced fighters is to train the Ukrainian army to use these aircraft.

5. Zelensky requested (Europe) to provide long-range weapons and aircraft. After that, German Prime Minister Schultz assured Zelensky at the meeting in Paris that Germany would provide military support to Ukraine as long as Ukraine needed it.

Institutional Perspective

01

Goldman Sachs

Goldman Sachs Asset Management said in a report that the deposit rate of the European Central Bank is expected to peak at 3.50% this summer. At present, the deposit rate of the European Central Bank is 2.50%. However, the asset management company said that it believed that the risk was inclined to suspend the tightening policy earlier. The European Central Bank is expected to raise interest rates by 50 basis points at the March meeting, which is consistent with the rate increase last week. However, it said that the more balanced assessment of the inflation outlook by the European Central Bank made the policy outlook more uncertain from the second quarter.

02

SOCIETE GENERALE：EURUSD for a long time bullish

After the market interpreted the European Central Bank's interest rate decision in February as dovish, the rise of the  EURUSD stopped abruptly. Economists from SOCIETE GENERALE pointed out that in the long run, the euro still points upward against the dollar. Technically, the possibility of further profit taking cannot be ruled out. The European Central Bank may try to correct the dovish interpretation of the market's interest rate decision and statement in February, which may attract euro buying, but confidence may remain low until the US CPI is released next week. Due to the improvement of its own terms of trade, the boost of China's economic growth, the narrowing of the policy interest margin of the Federal Reserve/European Central Bank and the attractive valuation, the long-term trend of EURUSD is still inclined to rise. The main downside risks are the new offensive launched by Russia against Ukraine, the further deterioration of relations between Russia and the West and the interruption of energy supply in Europe.

03

MUFG：The dollar has recovered most of its decline since the beginning of the year

MUFG Financial Group said in a report that the US dollar continued to strengthen and reached its highest level against a basket of currencies in nearly four weeks after the release of the better-than-expected US employment data last Friday, as the US economy looked more resilient and there might be more interest rate hikes. Market participants have begun to price the possibility that the Federal Reserve will raise interest rates at least twice by 25 basis points before suspending the rate increase cycle. The US interest rate market has lowered its expectation of starting to cut interest rates later this year, so the US dollar has recovered most of the decline since the beginning of the year.