Mai hui MHmarkets: July 20, 2023 - Fundamental Reminder

☆ 09:15 CNY Loan Prime Rate 1Y (JUL/20)

☆ 09:30 AUD Unemployment Rate s.a (JUN)

☆ 20:30 USD Initial Jobless Claims (JUL/15) & USD Philadelphia Fed Manufacturing Index (JUL)

☆ 22:00 USD Existing Home Sales (JUN) & USD CB Leading Index MoM (JUN)

☆ 22:30 USD EIA Natural Gas Stocks Change (JUL/14)

☆ The following day at 02:30 New York crude oil August futures complete final trading on the exchange

Market Overview

Review of Global Market Trend

The UK's June year-on-year CPI growth rate, released on Wednesday, fell to a more than one-year low, and inflation in Canada and New Zealand also cooled, which boosted market sentiment. There was no important data released in the U.S., and the market is nervously waiting for the results of next week's Federal Reserve interest rate meeting, as the U.S. dollar index regained the 100 mark, closing up 0.32% at 100.28.

U.S. bond yields also diverged, two-year U.S. bond yields in the U.S. market to stop falling to rise, once rose to 4.78%, while the 10-year U.S. bond yields late in the session once fell to 3.72%.

Spot gold lost the 1970 mark at the beginning of the U.S. session, closing down 0.08% at $1977.15 per ounce; spot silver maintained gains, closing up 0.35% at $25.14 per ounce.

Crude oil by the supply tightening is expected to boost, the disk once recovered since last Friday most of the lost ground. WTI crude oil once pushed up to $77 per barrel, Brent crude oil once pushed up to $81 per barrel. But last night's data released last week, the U.S. EIA crude oil inventories fell far less than expected, the U.S. crude oil and Brent crude oil turned down, WTI crude oil closed down 0.59% at $75.33 per barrel; Brent crude oil lost $80 mark, closed down 0.37% at $79.43 per barrel.

The three major U.S. stock indexes consolidated throughout the day, with the Dow closing up 0.31%, the S&P 500 closing up 0.22%, and the Nasdaq edging up 0.03%. Apple was exposed to be quietly developing AI large language model, pulled back after the intraday rally, closed up 0.8%, market value continued to hit a new record high. Nasdaq China Golden Dragon Index closed up 0.7%, Xiaopeng Automobile rose more than 4%.

Major European stock indexes diverged, with Germany's DAX 30 closing down 0.02%, Britain's FTSE 100 closing up 1.82%, and Europe's Stoxx 50 closing down 0.12%.

Market Focus

1. EU plans to create another 20 billion euros “Ukraine Defense Fund”.

2. The SEC will launch a review of the Bitcoin Spot ETF this week. Nasdaq abandons launch of crypto custodian business.

3. The UAE and Turkey signed a number of agreements in the fields of defense, energy, science and technology, worth a total of $50.7 billion.

4. Gurman: Apple is quietly working on AI big language models, including a chatbot dubbed Apple GPT. There is no internal agreement on the company's AI development.

5. Tesla's Q2 revenue rose 47% year-on-year to $24.9 billion, gross margin recorded a lower-than-expected 18.2%, and the company said its Shanghai factory was running at nearly full capacity. Will spend more on AI, expect Q3 production to drop slightly due to factory upgrades.

6. Russian Defense Ministry: will consider all ships heading to ukrainian ports as potential military cargo carriers, parts of the black sea have been temporarily declared a dangerous navigation zone. Global grain futures prices surged in response.

Geopolitical Situation

Conflict Situation

1. Ukraine said it shot down 14 missiles and 23 drones launched by Russia overnight. Russia has launched air strikes on the Ukrainian port city of Odessa for the second night in a row.

2. A fire broke out at a military base in Crimea, according to Russian-appointed local officials; About 2,000 people are to be evacuated from near the KIROVSKE military base in Crimea.

3. The General staff of Ukraine's armed forces reported the loss of 470 Russian troops over the past day, along with equipment including four tanks, 31 artillery systems and 46 tactical drones.

4. Richard Moore, head of MI6: Russian forces are unlikely to regain momentum.

5. Russian Defense Ministry: Russian forces have captured Morchanovo railway station in the Kharkiv region of Ukraine.

Assistance Situation

1. According to Ukrainian TSN television: Ukraine's Allies expressed strong support for Ukraine at the 14th Ramstein Defense Contact Group meeting, discussing the provision of long-range missiles, special demining equipment, additional air defense equipment, as well as armored vehicles, artillery shells and other assistance to Ukraine.

2. Foreign media: The European Union plans to establish another 20 billion euros of “Ukrainian defense fund” as funds for Ukraine run out.

3. According to Ukraine Pravda: Ukrainian Defense Minister Oleksandr Reznikov proposed to allow the deployment of foreign military bases in Ukraine and to amend the Ukrainian Constitution to accommodate this need. Lithuania's defense minister announced the formation of a mine-clearing alliance to help Ukraine, in which member states could arrange instructors to train Ukrainian bomb disposal experts or provide some mine-clearing equipment. In addition, launchers for the NASAMS air-defense system, which Lithuania bought for Ukraine at its own expense, will arrive this autumn.

Food Situation

1. Russia's Defense Ministry said it would treat all ships heading to Ukrainian ports as potential military cargo carriers starting July 20, and parts of the Black Sea have been temporarily declared a dangerous navigation zone. Affected by this news, CBOT wheat multiple contracts rose by the daily limit; August corn and rapeseed futures on Euronext Paris both rose to four-month highs.

2. Hungarian Minister of Agriculture: The CEEC requested the temporary continuation of the import ban on Ukrainian wheat, corn, rapeseed and sunflower seeds. Hungary will take “all measures” to prevent further suffering for Hungarian farmers if the EU does not extend the Ukrainian grain ban until at least the end of the year.

3. Polish Agriculture Minister: Five Central European countries want to extend a ban on Ukrainian grains. Will not open the border to Ukrainian grain in mid-September.

4. Ukraine said Russian attacks had damaged the facilities of Viterra, a large international grain trader in Ukraine, and Kernel, a grain processor. Ukrainian Minister of Agriculture: Most of the grain export infrastructure in the Ukrainian port of Chornomorsk has been damaged. The Russian attack destroyed 60,000 tonnes of grain.

5. Zelensky: Ukraine is considering escorting grain convoys.  

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs：It would take a shock of 2m b/d to reach triple digits】

July 20 - The rise in Brent crude over the past three weeks has been driven by a shift in market forecasts for the second half of the year to short supply, Goldman Sachs analyst Callum Bruce said in a note. The price could go even higher. Goldman expects oil prices to continue to move towards the bank's December 2023 price target of $86 a barrel, but to reach $100 is unlikely, with a move to that level driven by supply rather than demand. Current Goldman forecasts for second-half supply and demand would require a shock of 2m b/d to push prices into triple digits.

02

SOCIETE GENERALE

 SOCIETE GENERALE：Tomorrow's UK CPI data may influence the BOE's rate hike.

03

MUFG

MUFG：It is understandable that USD/JPY has regained lost ground

July 19 - BOJ Governor Kazuo Ueda's latest speech partly triggered a new rally in US DOLLAR/YEN. MUFG economists said Mr. Ueda acknowledged that market functioning had improved, but that the decision to adjust YCC would be based more on fundamentals than market functioning at this critical juncture. The market's reaction to Ueda and Noo's comments suggests that speculation of a YCC adjustment next week has diminished. But we think the BOJ's economic projections next week will provide a case for adjusting the YCC. And when there is no upward pressure on yields, not yet threatening the 0.5% range ceiling, it is an ideal time to adjust YCC. Key will remain Friday's Japanese CPI data, which could once again trigger another round of speculative pricing in the market. But USD/JPY has understandably regained some ground against the backdrop of improving risk appetite and softlanding optimism.