Mai hui MHmarkets: July 28, 2023 - Fundamental Reminder

☆At 11:00, JPY BOJ Interest Rate Decision & JPY BOJ Quarterly Outlook Report

☆At 14:30,JPY BOJ Governor Kazuo Ueda Press Conference

☆At 20:30, USD Personal Spending MoM (JUN) & USD Core PCE Price Index MoM (JUN) & USD Core PCE Price Index YoY (JUN) & USD Employment Cost QoQ (Q2)

☆At 22:00, USD Michigan Consumer Sentiment Final (JUL)& USD Michigan 1 Year Inflation Expectations (JUL)

☆The next day at 01:00, USD Baker Hughes Total Rig Count (JUL/28)

Market Overview

Review of Global Market Trend

Pre-market data on Thursday showed US GDP growth unexpectedly accelerated in the second quarter and durable goods orders rose much faster than expected in June, raising expectations of a “soft landing”; Separately, the European Central Bank signaled it may not raise rates further after raising rates by 25 basis points as scheduled. Boosted by this, the dollar index stopped falling and rebounded, regaining 101 and closing up 0.67 percent at 101.77. In addition, Japanese media broke out this morning that the Bank of Japan will discuss adjusting YCC (yield curve control), triggering a huge shock in the global currency market, and the yen staged a counterattack, with the dollar falling more than 1% against the yen.

Treasury yields accelerated after the stronger-than-expected U.S. data, with the two-year yield briefly rising above 4.95 percent to close at 4.93 percent, up nearly 8 basis points on the day and erasing the previous two days' decline. The yield on the 10-year Treasury rose about 13 basis points on the day to close near 4%, its first close above 4% since July 7.

Spot gold took a hit from closing higher in the dollar and Treasury yields, falling as low as $1,942.66 an ounce, plunging nearly $40 from its session high to settle down 1.37% at $1,945.15 an ounce. Spot silver closed down 3.22 percent at $24.12 an ounce, nearly wiping out all its gains of the past two weeks.

Oil was supported by strong U.S. economic data, with WTI crude briefly topping $80 a barrel for the first time in three months and closing up 1.12 percent at $79.77. Brent crude broke above $84 a barrel earlier in the session and closed up 0.93 percent at $83.39.

The three major US stock indexes opened higher and closed down collectively, with the Dow Jones Industrial Average falling 0.67%, ending 13 consecutive gains, the Nasdaq falling 0.55%, the S&P 500 falling 0.63%, and most of the popular technology stocks falling, Tesla falling more than 3%, Microsoft falling more than 2%, Meta rising more than 4%.

Major European stock indexes closed higher across the board, with Germany's DAX30 up 1.71%, Britain's FTSE 100 up 0.22% and the Euro Stoxx 50 up 2.34%.

Market Focus

1. Nikkei early morning break: The BOJ will discuss adjusting the YCC today to allow yields to moderately exceed the 0.5% ceiling. Affected by this, the yen was sharply pulled up more than 200 points.

2. The US Q2 GDP growth rate recorded 2.4%, far higher than the market expectation of 1.8%, driving the US dollar to strengthen unilaterally, except for the yen, the currency market is under pressure.

3. The Russian government will consider a bill proposed by lawmakers to raise taxes on oil exports, according to RIA Novosti.

4. Sources: The European Central Bank discussed raising the reserve requirement ratio for banks to 2% from 1% on Thursday.

5. US President Joe Biden has announced measures to combat the heat. USDA Drought Report: U.S. Soybean drought area Expands to 53%.

6. The US banking regulator announced a 16 per cent increase in capital requirements for banks with assets of $100bn or more, with the largest eight banks raising capital requirements by 19 per cent.

7. The ECB raised all three main interest rates by 25 basis points, the ninth consecutive increase and in line with market expectations; Lagarde, the bank's governor, said there may or may not be a rate rise in September, but there will be no rate cut.

Geopolitical Situation

Conflict Situation

1. Russian President Putin: Fighting in Ukraine has intensified recently.

2. The governor of Ukraine's Odessa Region said that Russia struck the region's port infrastructure in an overnight missile strike, and that some of the equipment in the port of Odessa was damaged after the Russian strike.

3. Ukraine's Deputy Prime Minister: Russian airstrikes damaged 26 Ukrainian port infrastructure facilities and 5 civilian ships in nine days.

4. Market News: Zelensky visited the southeastern city of Dnipro to discuss frontline supplies and air defense.

5. The Russian Federal Security Service (FSB) said it had foiled a “terrorist attack” on a vessel of the Black Sea Fleet.

6. According to TASS news agency, citing emergency services, six people were killed and seven injured in a helicopter crash in Siberia, Russia.

7. The Ministry of Defense of Russia informs that in the past day the Russian forces used sea- and air-based long-range precision-guided weapons against airfields, control and command centers of the Ukrainian Armed Forces, assembly workshops of unmanned boats, as well as missiles and weaponry from Europe and the United States.

8. The General Staff of the Ukrainian Armed Forces stated on 27 November that the Ukrainian Army continued to conduct offensives in the Bakhmut, Melitopol and Berdyansk regions, while continuing to prevent the advance of Russian forces in the direction of Kupyansk and Lemansk.

Energy Situation

1. According to TASS: Russia's energy minister said Gazprom plans to start hydrocarbon production at the EL ASSEL project in Algeria in 2026.

2. According to TASS: Russia expects oil production to reach 515 million tons in 2023.

3. Indian Bharat Petroleum executive: through Russian oil, Bharat Petroleum can meet an average of 30-40% of its oil needs. It is not expected to face any payment problems in purchasing Russian crude. However, it will face payment problems when the price of Russian crude oil exceeds $60 per barrel.

4. According to RIA Novosti: the Russian government will consider the bill of MPs proposing to raise the tax on oil exports.

5. According to TASS: Russian Energy Minister Shulginov said that the discount for Russian oil is below $15 per barrel.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs: Australia's 'doomsday prophecies' overstated】

July 27-- Goldman Sachs said it still thinks doomsday predictions of a recession in Australia are wrong, and believes the commodity-rich economy is on track for a soft landing. Goldman Sachs chief economist Andrew Boak said the weaker second-quarter CPI data was particularly encouraging in this regard. Nonetheless, there is still a possibility that the Australian Federal Reserve will need to raise interest rates from now on, although inevitably this is a close call and the situation will be further complicated by the fact that the Fed's response mechanism is still quite opaque, even if a final decision has been made on the selection of the next Fed chairman.

02

SOCIETE GENERALE

Societe Generale: The ECB is expected to raise interest rates by 25 basis points, and while it may be too early to provide firm guidance for further rate hikes in September, it is expected to raise rates for the last time in September as upside risks to inflation remain.

03

MUFG

【MUFG: The ECB has been very comfortable with the restrictive nature of interest rates】

July 27--MUFG in London senior foreign exchange analyst Hardman said: this statement shows that the European Central Bank is now more comfortable with the policy rate has reached a restrictive level. Previously they said they would move rates to a more restrictive level, and now they say they will set them at a sufficiently restrictive level. So the focus of policy going forward will be less on raising rates and more on keeping them higher for longer. For the markets, this may indicate that the ECB has indicated that the rate hike cycle is coming to an end, which triggered a sell-off in the euro.