June 7, 2023 - Fundamental Reminder

☆U.S. Treasury Secretary Janet Yellen is Going to Appear at a Hearing to be Determined

☆10:00 CNY Balance of Trade (MAY) & 11:00 CNY USD-Denominated Balance of Trade (MAY)

☆ 15:00 OECD Releases Economic Outlook Report

☆ 16:00 CNY Foreign Exchange Reserves (MAY)

☆ 20:30 USD Balance of Trade (APR)

☆ 22:00 CAD BoC Interest Rate Decision, and the Market is Expected to Hold Fire

☆ 22:30 USD EIA Crude Oil Stock Change (JUN/02) & USD EIA Strategic Petroleum Reserve Inventory (JUN/02)

Market Overview

Review of Global Market Trend

Markets were more muted Tuesday, but the dollar index closed up 0.14% at 104.15 after the survey showed only 51% of respondents believe a U.S. recession is imminent, down from 55% in May and the lowest level since May 2022. Goldman Sachs also cut the probability of a U.S. recession to 25%, predicting the Fed will raise rates by 25 basis points in July.

The Treasury is ramping up its issuance of ultra-short bills, and short-term yields turned higher. The yield on the two-year note rose as much as 8 basis points to 4.56% before closing near 4.49%. The yield on the 10-year Treasury note edged down to 3.67% from 3.68% during the day.

Spot gold came under pressure from higher dollar and Treasury yields, but the U.S. market turned higher and regained the $1,960 mark to settle up 0.08% at $1,963.28 an ounce. Spot silver closed up 0.11% at $23.59 an ounce.

Crude oil came under pressure on fears of a slump in demand due to global growth prospects, with WTI crude briefly falling below the $70 level and closing down 0.67% at $71.4 a barrel. Brent crude briefly fell below $75 earlier in the session and ended down 0.68% at $75.91 a barrel, with both oil erases all gains since the OPEC+ meeting.

The three major U.S. stock indexes closed slightly higher, with the Dow up 0.03%, the S&P 500 up 0.23% and the Nasdaq up 0.36%. Boeing closed down 0.72% on news that its 787 jet has been found to have a new defect, or delayed delivery. The Nasdaq Golden Dragon China Index rose more than 3.7%, Xunlei rose more than 24%, and iQIYI and Pinduoduo both closed up 7%. Coinbase, which was sued by the SEC, closed down 12%.

European shares rebounded slightly, with Germany's DAX30 index up 0.18%. Britain's FTSE 100 closed up 0.38%; France's CAC40 index closed up 0.11%; The Stoxx Europe 50 index closed up 0.05%; Spain's IBEX35 index closed up 0.24%; Italy's FTSE MIB index closed up 0.63%.       

Market Focus

1. The Kahovka hydroelectric dam in Kherson region was damaged on Tuesday and parts are suffering from flooding. Both Russia and Ukraine have accused each other of carrying out the dam damage.

2. Bank of England: has completed all planned sales of corporate bonds, reducing its holdings by more than 95% from its original £20 billion purchase.

3. Sequoia Capital announced a split, the world's three regions will no longer share the same brand, each completely independent.

4. Japan: Aims to triple sales of domestically produced semiconductors to more than 15 trillion yen ($108 billion) by 2030.

5. After suing Binance, the SEC sued crypto exchange Coinbase; The SEC chairman said there is already a digital dollar and no more are needed.

6. The Reserve Bank of Australia unexpectedly raised its benchmark interest rate by 25 basis points to 4.10% and said further increases were intended to bolster confidence that inflation would return to target over a reasonable time horizon.

7. The World Bank raised its 2023 global economic growth forecast to 2.1%, China's 2023 economic growth forecast to 5.6%, the US economic growth forecast to 1.1%.

Geopolitical Situation

Institutional Perspective

01

Goldman Sachs

Goldman Sachs lowered its recession expectations for the U.S. economy, saying another 25 basis point rate hike is most likely in July.

02

SOCIETE GENERALE

【Societe Generale: 10-Year U.S. and German Treasury Spreads Expected to Narrow】

On June 2, Societe Generale interest rate strategists wrote in a report that there is room for a narrowing of the 10-year U.S. Treasury/German bond yield spread, which is consistent with the usual trend around the last Fed rate hike. They said, “Eurozone core inflation has yet to plummet, while the ECB's stance is less restrictive than the Fed's.” They said, “This has helped narrow the spread between U.S. Treasuries and U.S. Treasuries.” The yield spread between 10-year U.S. Treasuries and 10-year German Bonds currently stands at 135 basis points, with the 10-year U.S. Treasury yielding about 3.62% and the 10-year German Bond yielding about 2.27%, according to Tradeweb.

03

MUFG

The boosting impact of strong non-farm payrolls data on the dollar may have been partially dampened.