May 19, 2023 - Fundamental Reminder

☆ 20:45, FOMC permanent voting member and New York Fed President Williams delivers the keynote speech at the Fed Board event. Watch for his remarks to continue to favor a pause in rate hikes.

☆ 21:00, Fed Governor Bowman participates in the discussion session of the Bankers Conference. Earlier she had argued that if inflation remains high and the labor market remains tight, then further rate hikes “may be appropriate”.

☆ Fed Chairman Powell, former Chairman Bernanke attend the panel discussion on monetary policy. The recent Fed internal hawk and dove voice mixed, pay attention to Powell will “a hammer to determine the voice”.

☆ The next day at 3:00, ECB President Lagarde and Management Board member Hernandez de Cos attend an expert group meeting held by the Central Bank of Brazil.

Market Overview

Review of Global Market Trend

On Thursday, as the U.S. released more strong economic data further weakened market bets that the Federal Reserve may hold off on interest rate hikes, spot gold extended its decline, extending losses in the U.S. session and once plunged to $1952.01, which was a new low in a month and a half, plunging more than $30 from the daily high, and finally closed down 1.22% at $1957.55 per ounce. Spot silver fell by more than 1% during the day, eventually closing down 1.04% at $23.49 per ounce.

The dollar index hit a new high of nearly 7 weeks and stood above the 103 mark, eventually closing up 0.64% at 103.52; U.S. bond yields also rose sharply, the two-year U.S. bond yields more sensitive to the interest rate outlook rose to an intraday high of 4.281%, eventually closing at 4.260%; 10-year U.S. bond yields stood above 3.6%, eventually closing at 3.651%.

Alternatively, due to the strong US dollar, crude oil fell more than 1% in mid day trading on Thursday. WTI crude oil fell to an intraday low of $71.53 in the US market, then regained some of its losses and ultimately closed down 0.96% at $71.92 per barrel; Brent crude oil fell to around $75 and ultimately closed down 1.15% at $75.83 per barrel.

The three major U.S. stock indexes closed up collectively on Thursday, with the Nasdaq closing initially up 1.51%, the Dow closing up 0.34% and the S&P 500 up 0.94%. The Nasdaq China Golden Dragon Index fell 3.5%, with Chinese e-commerce stocks leading the decline, with Alibaba closing down 5.4%, Pinduoduo and Jingdong down 7.3% and 4.1% respectively after the results. Large U.S. technology stocks such as Microsoft, Google, Tesla and Apple generally closed up between 1% and 2%, driving the Nasdaq stronger.

European stocks closed higher across the board, with Germany's DAX30 index closing up 1.33%; Britain's FTSE 100 index closed up 0.25%; Europe's Stoxx 50 index closed down 1.02%.         

Market Focus

1. Fed-vote member Logan: the current data is not enough to suspend interest rate hikes. Bullard: banking sector concerns are overemphasized and support further rate hikes as insurance against inflation. Jefferson: waiting for data to observe the lag effect of tightening and uncertainty about credit tightening, the above are all statements made after the release of lower-than-expected unemployment data on the evening of the 18th, the market believes that the probability of a Fed rate hike in June rose to 40%.

2. the U.S. Air Force announced plans to award a contract for the development of a sixth-generation fighter jet in 2024 and enter service in 2030, hoping to be able to operate in tandem with a drone in another development program.

3. India plans to import about 9.2 million barrels of oil to fill its oil reserves, people familiar with the matter said.

4. U.S. officials: G7 ready to implement new sanctions and export controls on Russia, working to maintain the price ceiling of Russian oil.

5. Republican members of the U.S. Congress plan to submit articles of impeachment against Biden, mainly related to border immigration issues.

6. International Energy Forum (IEF): Global oil demand reached a record level in March.

7. Debt Ceiling-Some Democrats told Biden to prepare to enable the 14th Amendment, bipartisan leaders are working on a voting plan to vote on a potential deal next week, McCarthy said the current posture of the deal is better than a week ago, and the Treasury TGA balance fell to a 2021 low of $68.3 billion.

Geopolitical Situation

Conflict Situation：

1. Ukraine is reported to have shot down 29 of the 30 Russian missiles last night.

2. The Ukrainian military reported several explosions in Kiev and other parts of Ukraine on Thursday morning.

3. Russian-appointed Crimean officials: rail traffic between Simferopol and Sevastopol was disrupted.

4. Russian Defense Ministry says it has attacked Ukrainian military targets with high-precision missiles.

5. Ukrainian Deputy Defense Minister: Ukrainian forces took control of the southwestern part of Bakhmut. Heavy fighting in the southern suburbs of Khemut continued throughout the day, and Russian troops launched another offensive.

Sanction Situation：

1. EU official: EU to push for future G7 sanctions on diamond sector. There are no specific proposals for diamond sanctions in the EU yet, but they are aimed at tracking diamonds and reducing Russian exports. The issue of sanctions on diamonds will appear in the G7 communique.

2. Kremlin: There is some hope that different programs are being developed to ease restrictions on Russian agricultural banks. The decision to freeze the bank accounts of Finnish diplomatic missions in Russia is a response to the unfriendly behavior of the West.

3. Senior U.S. government officials said all G-7 members are prepared to impose new sanctions and export controls on Russia and remain committed to maintaining price caps on Russian oil.

4. U.S. officials said the United States will impose approximately 300 sanctions on Russian individuals, entities, vessels and aircraft in Europe, the Middle East and Asia. The U.S. will add 70 Russian entities to the Commerce Department's export blacklist and add more industries to its authority to sanction Russia. The U.S. sanctions will target financial intermediaries, Russia's future energy extraction capabilities.

5. The UK banned Russian nickel imports, but other G7 countries did not follow suit.

Energy Situation：

1. Prime Minister of Moldova: from today Moldova will no longer use Russian gas.

2. Gazprom plans to increase domestic gas storage capacity before winter, aiming to accumulate 72.842 billion cubic meters of gas stocks.

3. Russia's oil and gas revenues may fall by about 55 billion rubles in May, Reuters calculates.  

Institutional Perspective

01

Goldman Sachs

Lakdawala Flynn, Co-Head of Global Private Wealth Management at Goldman Sachs: Family Wealth Management Room to Buy Stocks Based on Volatility

02

SOCIETE GENERALE

【Societe Generale: AUDUSD will test bottom of current range around 0.6560】

On May 18th, Societe Generale chief global foreign exchange strategist Kit Juckes said weak Australian employment data dragged the Australian dollar lower, the Australian dollar against the dollar is expected to challenge 0.6560. Juckes said the number of Australian jobs recorded a decline of 43,000 after increasing by 113,000 in the previous two months, but it prefers to focus on the underlying trend, namely the first four months of this year an average monthly The increase was 28,000 in the first four months of the year and an average of 32,000 in the past 12 months. Potential job growth is slowly slowing to below 3%, which is what most countries would like to see. However, as the likelihood of further interest rate hikes by the Australian Federal Reserve wanes, the AUDUSD will test the bottom of the current range around 0.6560.

03

MUFG

Mitsubishi UFJ: Higher Dollar Stems from Easing Debt Ceiling Concerns, Reducing Rate Cut Bets

On May 18th, Mitsubishi UFJ analyst Derek Halpenny said the dollar advanced against most other G10 currencies as comments from U.S. politicians increased market optimism that a deal to raise the debt ceiling would be reached, boosting risk appetite and in turn lowering bets on future U.S. interest rate cuts. This comes after US President Joe Biden said that fruitful negotiations with Republicans may avoid a default.