Mohicans markets：

February 24, 2023 - Fundamental Reminder

☆ Today, the G7 will announce a new round of sanctions against Russia.

☆ At 8:30, the nominee of the governor of the Bank of Japan, Kazuo Ueda, will attend the confirmation hearing of the House of Representatives. This is his first official activity to clarify his views on the prospects of economic and monetary policy. Investors must pay attention to his views on monetary policy.

☆ At 21:30, the United States will announce the annual rate of the core PCE price index in January. At present, the market expects that it will only fall slightly to 4.3% from 4.4% of the previous value.

Market Overview

Review of Global Market Trend

On Thursday, spot gold rose first and then fell, reaching a maximum of $1833.67, but failed to stand at the 1830 level and closed down 0.16% at $1822.29 per ounce; Spot silver fell sharply in the US market and closed down 0.93% at $21.31 per ounce.

The US dollar index was still hovering above the 104 level and closed up 0.11% at 104.61; The yield of 10-year US Treasuries closed at 3.890%.

In terms of crude oil, the two oils rebounded sharply during the day. WTI crude oil recovered to above $75, and closed up 2.41% at $75.61 per barrel; Brent crude oil rose 2.4% to $82.19 per barrel.

The US stock index closed up 0.336%, the S&P 500 index closed up 0.53% and the Nasdaq index closed up 0.72%.

 Most European stocks closed higher, with Germany's DAX30 index closing up 0.49% at 15475.69; The FTSE 100 index of the UK closed down 0.29% at 7907.72; The European Stoxx 50 Index closed up 0.36% at 4258.16.

Market Focus 

1. US Q4 GDP was revised down by 0.2% to 2.7%; The core PCE of Q4 was revised up by 0.4% to 4.3%.

2. The IMF Board of Directors “generally agreed” that cryptocurrency should not become legal tender.

3. The first American manufacturer of “COVID-19 Home Self Test Kit” approved by the US Food and Drug Administration applied for bankruptcy.

4. The rise of core inflation in the euro zone to a record 5.3% may support the hawkish stance of the European Central Bank.

5. The Baltic Sea bulk dry freight index rose 21% on Thursday, the second largest record increase.

6. LME nickel will resume trading in Asia on March 20; CME launched a nickel contract.

7. The United States will nominate Banga, the former CEO of MasterCard, as the President of the World Bank.

8. Vietnam's real estate debt crisis intensified, and the second largest developer sought to extend the bond.

Geopolitical Situation

Energy situation:

1. Russian President Putin signed a law to limit the discount of Russian Ural oil to Brent crude oil in order to calculate the oil tax.

2. Japanese Finance Minister Junichi Suzuki said that the G7 did not discuss the issue of lowering the ceiling on the export price of Russian crude oil.

Assistance Situation:

1. The Prime Minister of Ukraine said that Ukraine sought to obtain the comprehensive (assistance) plan of the International Monetary Fund for four years.

2. The G7 urged the International Monetary Fund to finalize Ukraine's aid plan before the end of March. The G7 increased its assistance to Ukraine to $39 billion.

3. US Treasury Secretary Yellen: In the coming months, Ukraine will be provided with US $10 billion of new economic assistance.

4. The European Commission proposes to extend the EU's provisions on the elimination of import tariffs, quotas and trade protection measures for Ukrainian products for one year.

5. The UK will extend the temporary tariff relief policy to Ukraine until the beginning of 2024.

6. Spain: The number of “Leopard 2” main battle tanks transported from Spain to Ukraine will increase from 6 to 10.

7. The Greek Defense Minister: will not provide Ukraine with S-300 anti-aircraft missiles.

8. Polish Defense Minister: The United States has approved the sale of 500 rocket systems to Poland.

9. American media: The United States will provide long-range guided bombs to Ukraine.

10. Finland will send three Leopard 2 main battle tanks to Ukraine, and will provide weapons assistance amounting to 160 million euros to Ukraine.

Institutional perspective

01

Goldman Sachs

Goldman Sachs said that at least in the next two years, the shortage of natural gas supply from Russia will still be a problem facing Europe, and pointed out that by the summer of 2024, the price of natural gas may double the current level. Although the current natural gas inventory is in good condition, the fall in natural gas prices this summer may push up demand, and Europe is unlikely to repeat the current warm winter. The bank said in a report that the structural deficit of European natural gas balance caused by the interruption of Russian natural gas supply has not been resolved. They expected that a more sustainable solution to the European energy crisis would not be found until 2025.

02

SOCIETE GENERALE

[SOCIETE GENERALE: The European Central Bank may raise interest rates further to boost the euro]

Societe Generale said that the European Central Bank may further raise interest rates significantly to curb inflation, thus boosting the euro. Olivier Korber, foreign exchange strategist at Societe Generale, said in a report that the risk of recession in Europe and the tight labor market should maintain the upward risk of core inflation. Economists at the bank still expect the European Central Bank to further tighten its policy significantly. The European Central Bank will suspend interest rate increases only when the economy is on a more sustainable path of inflation. Korber said that due to the cautious attitude of the market, the peak interest rate expectation may be repriced higher.

03

MUFG

Lee Hardman, a foreign exchange analyst at MUFG, said in a report that the minutes of the Federal Reserve meeting on Wednesday showed that most officials preferred to raise interest rates slightly by 25 basis points, but did not provide further measures to boost the dollar, but the dollar is still expected to continue to perform well. With the support of the recent rise in the short-term yield of the United States, the dollar should continue to trade on a more solid basis in the short term, but the Federal Reserve did not provide a new catalyst to trigger further upside overnight. He said that the US dollar weakened moderately in Asian trading session, especially in relation to commodity related currencies with higher risk.