MHMarkets：August 17, 2023 - Fundamental Reminder

August 17, 2023 - Fundamental Reminder

☆20:30 USD Initial Jobless Claims (AUG/12)

Expectations are for 240,000, compared with 248,000 previously.

Market Overview

Review of Global Market Trend

On Wednesday, after the Fed minutes showed that most policymakers continue to prioritize the fight against inflation, spot gold extended intraday losses, fell below the previous low of $1893 per ounce, a new low since March this year, and finally closed down 0.49% at $1892.33 per ounce; spot silver on the whole first rose and then fell, and finally closed down 0.32% at $22.44 per ounce.

The dollar index was once below the 103 mark during the day, then rebounded and reversed the downtrend, the highest intraday hit 103.54, and finally closed up 0.233% at 103.46. The yield on the U.S. 10-year Treasury bond continued to climb, closing at 4.253%, renewing the highest in nearly 10 months. The U.S. 30-year Treasury yield reached a new 2023 high.

The higher dollar has generally pressured non-US currencies. The dollar rose against the yen for the eighth consecutive day and rose above the 146 mark for the first time since November last year, reaching a level where Japan intervened in the foreign exchange market for the first time in years. The offshore yuan fell below the 7.34 mark against the dollar.

Despite the expected decline in U.S. crude oil inventories, international crude oil followed the stock market down to lows since early August after the release of the Fed minutes.WTI crude oil fell below the 80 mark and eventually closed down 2.1% at $79.38/bbl, while Brent crude oil closed down 1.95% at $83.47/bbl.

The three major U.S. stock indexes opened lower, with the Dow closing down 0.52%, the Nasdaq closing down 1.15%, and the S&P 500 closing down 0.76%. The Nasdaq China Golden Dragon Index closed down 1.6%, Jingdong closed down 3% on its first trading day after announcing earnings, and NEXTEV closed down 3.4%, after accumulating losses of more than 25% this month. Vietnamese electric car maker VinFast closed down 18%.

Most of Europe's major stock indexes closed lower, with Germany's DAX 30 closing up 0.14%, Britain's FTSE 100 closing down 0.44% and Europe's Stoxx 50 closing down 0.1%.

Market Focus

1. Minutes of the July meeting of the Federal Reserve: most officials emphasized that there are significant upside risks to inflation, two officials preferred to keep interest rates unchanged, and a number of officials warned of the risk of excessive tightening.

2. Russia's Luna-25 probe has entered lunar orbit.

3. the S&P 500 rally is weak, Bridgewater short U.S. stocks and U.S. bonds.

4. Atlanta Fed's GDPNow model raised its estimate of US Q3 economic growth to 5.8% vs. 5.0% yesterday.

5. The New Zealand Fed left rates unchanged at 5.50%, the second consecutive pause in rate hikes. The bank's forecast shows little chance of another rate hike.

6. overnight market nodes - yen exchange rate fell through the previous intervention level, spot gold fell to March lows, the offshore yuan fell below the 7.34 mark against the dollar, international oil prices erased gains fell more than 2%.

7. Argentine presidential candidate Javier Millet: if elected will close the central bank, the economy will be fully converted to dollarization; will simplify the government sector, will not ask for money from the IMF again, and withdraw from Mercosur.   

Geopolitical Situation

Conflict Situation

1. Ukraine's Deputy Defense Minister: Ukrainian forces have retaken Urozain in the Donetsk region and are stationed on the outskirts.

2. The Ukrainian military released Russian surveillance footage when it showed the results of its attack on the Crimean bridge using the “Sea Baby” unmanned boat. The Russian Duma representative called on law enforcement agencies to find out how Ukraine obtained the CCTV footage of the Crimean bridge.

3. Russia's Defense Ministry said it destroyed three Ukrainian drones in Russia's Kaluga region.

4. Russian Defense Ministry: Russian forces repelling multiple Ukrainian attacks in Zaporizhzhai, Luhansk, Donetsk and other directions. Russian forces are also hitting Ukrainian weapons and ammunition depots in several places.

5. Odessa Governor: Russia attacked Ukraine's Danube port overnight, destroying warehouses and grain sires.

6. Interfax: Russia's Defense Ministry says it shot down a Ukrainian drone over Crimea.

7. TASS: The FSB has foiled a breakthrough attempt by Ukrainian sattlers in the Bryansk region.

8. General Staff of the Ukrainian Armed Forces: The Ukrainian air Force carried out seven strikes on areas where Russian personnel and equipment were concentrated.

Institutional Perspective

01

Goldman Sachs

【Goldman Sachs：Widespread adoption of AI by businesses could boost S&P 500 earnings growth over the long term】

August16 - Artificial intelligence remains a hot topic on US corporate earnings calls, with the percentage of companies mentioning the topic soaring during the second-quarter earnings season, according to Goldman Sachs strategists. A big surge in AI-related stocks this year has driven the US stock market higher, with investors piling into the seven biggest stocks in the S&P 500 that are seen as the main beneficiaries of AI. The widespread adoption of AI could boost S&P 500 earnings growth over the long term, according to Goldman strategists led by David Kostin. However, there is still a lot of uncertainty about how long the impact of AI will last and how big its impact will be in the presence of risks such as regulations, taxes and interest rates.

02

SOCIETE GENERALE

SOCIETE GENERALE：The US core CPI is expected to have increased 0.3% month-over-month. A level of 0.4% or higher would signal chaos

August 10 - We expect the US core CPI to rise 0.3% month-over-month in July, up from 0.2% in June, Societe General Bank economists said. That's not a disaster, but it's not ideal, and it's not what a data-dependent Fed wants. That could help yields recoup ground lost earlier in the week amid heightened risk aversion. Month-on-month growth of 0.4% or more could signal chaos, including a hawkish repricing of the Fed, a sell-off in US Treasuries (and Bunds), swap payments, risk aversion in equities/credit/high beta FX, and dollar strength. A monthly rate of 0.2% or less would be a Goldilocks scenario: risk appetite in equity and currency markets, and a bullish flattening in 2-year / 10-year Treasuries.

03

MUFG

【MUFG：The BOJ is expected to normalize policy as soon as 2024】

The BOJ may shift its monetary policy toward normalization as early as January-March 2024, MUFG Executive President and head of global markets Hiroyuki Seki said in an interview, Kyodo News reported. He believes the BOJ is “not far” from achieving its 2 per cent inflation target as wages have risen amid Labour shortages and companies raising prices. In addition, he expects the 10-year yield to reach a range of 0.7 to 0.8% this fall, depending on price trends, currencies, foreign interest rates and the political situation.