MHMarkets：August 25, 2023 - Fundamental Reminder

☆22:05, Federal Reserve Chairman Powell speaks at the Jackson Hole Global Central Bank Conference.

☆A slew of Fed officials will speak to the media, including: 2023 FOMC Voting Committee, Philadelphia Fed President Harker (23:00); 2023 FOMC voting Committee, Chicago Fed President Goolsbee (0:30 and 2:00 the next day); 2025 FOMC Voting Committee, Cleveland Fed President Mester (2:30 the next day).

☆At 3:00 the next day, European Central Bank President Christine Lagarde speaks at the Jackson Hole Global Central Bank Conference.

Market Overview

Review of Global Market Trend

On Thursday, as sentiment turned cautious ahead of Powell's speech, spot gold was flat, still hovering near a two-week high, before settling up 0.13% at $1,916.88 an ounce. Spot silver pulled back and ended down 0.77% at $24.14 an ounce.

The dollar index rebounded strongly as data showed labor conditions remained tight, ending up 0.6% at 104 for the first time since June 8. Us Treasury yields rose, with the 10-year Treasury yield closing at 4.245% and the two-year yield back above 5%.

International crude oil closed slightly higher, barely ending a three-day losing streak, as traders weighed rising supply against an uncertain demand outlook. WTI crude fell more than 1% at one point before quickly recouping losses to end up 0.43% at $79.34 a barrel. Brent crude settled up 0.1% at $83.17 a barrel.

The three major U.S. stock indexes closed higher and lower, with the Dow Jones Industrial Average down 1%, the Nasdaq down 1.87 % and the S&P 500 down 1.3%. The Nasdaq China Golden Dragon Index closed down 0.66%. Bucking the trend, Vietnamese EV maker VinFast closed up 32% and hit a record closing high, giving it a market capitalisation of $114bn. Nvidia, which opened sharply higher, fluctuated lower throughout the day before closing up just 0.12%.

Major European stock indexes were mixed, with Germany's DAX30 closing down 0.68%, Britain's FTSE 100 up 0.18% and the Euro Stoxx 50 down 0.81%.

Market Focus

1. Johannesburg Declaration of the 15th BRICS Summit: Study of BRICS Local currency cooperation.

2. Putin expressed condolences to the family of Wagner Group founder Igor Prigozhin.

3. Turkey's central bank raised interest rates by 750 basis points to 25%, beating market expectations of 250 basis points.

4. Trading company Kataman Metals says it bought “nickel” replaced with stone for $3.3 million.

5. Maximum vessel draft depth and daily navigation restrictions in the Panama Canal will remain in place for at least another 10 months.

6. The BRICS countries agreed to invite Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE to become full members from 1 January 2024.

7. Reuters quoted U.S. officials as saying the U.S. believes the plane carrying Prigozhin was likely shot down by a surface-to-air missile fired from Russian territory.

8. Nvidia closed up 0.1% on its first day of trading after its blockbuster results; VinFast, a Vietnamese electric-vehicle maker, closed at a record high, with a market capitalisation of $110bn.

9. Fed - Harker: sees interest rates on hold this year; Collins: Additional rate hikes may be needed, current rates may be close to where they can stay on hold Former official Bullard: Economy heating up may delay Fed's plans to end rate hikes

Geopolitical Situation

Conflict Situation

1. Russia's military said it intercepted a Ukrainian S-200 missile over Russian territory.

2. Russia's military said it shot down three Ukrainian drones in Russian territory.

3. Ukrainian officials said some people were injured after the attack in Dnipro.

4. Ukrainian officials say seven people were wounded in an air strike in Donetsk.

5. Spokesman of the General Staff of the Ukrainian Defence Forces: The Ukrainian army is launching an offensive south of the city of Bakhmut and is succeeding.

6. Ukrainian military intelligence said the Ukrainian military and navy conducted a “special operation” in Russia-occupied Crimea last night, including a landing on the peninsula.

Food Situation

1. Minister of the Prime Minister's Office of Hungary: Suggested that the EU continue to extend the import ban on Ukrainian agricultural products.

2. Ukraine completed the 2023 wheat harvest with a total output of 21.94 million tons, according to the Ministry of Agriculture of Ukraine.

3. Russian Foreign Minister Sergei Lavrov told UN Secretary-General Antonio Guterres that Russia is willing to resume the food agreement if Russia's conditions are met.

Institutional Perspective

01

Goldman Sachs

The larger-than-expected rate hike by Turkish Central Bank was a “stronger step” toward bringing real interest rates into positive territory, which would make the lira more attractive.

02

SOCIETE GENERALE

【SOCIETE GENERALE：The dollar remains the most popular currency】

August 24 - Although currency markets are still in the summer downturn, the US dollar is still the top dog in the market, said Kit Juckes, chief global FX strategist at Societe Generale. The US Dollar moved higher in August and is expected to continue to rise until the BOJ acts (they won't meet again until September 22nd), the European data turns better (very unlikely) or the US data is weak and/or the Fed officials adopt a more cautious tone at Jackson Hole.

03

MUFG

The BOJs record pace of bond purchases increases the need to adjust yield curve control policies

The BOJ has bought government bonds at a record pace this year, which may be one factor prompting the bank to allow yields to fluctuate in a wider range in the near term, reducing pressure on it to keep long-term rates under control. The BOJ hasn't significantly reduced its bond purchases after widening the yield-curve band in December and last month, and the ramp-up after each change raises questions about whether the central bank is moving too slowly to adjust policy and would have to go too far to stop investors from pushing yields too high. Naomi Muguruma, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities, said that if the BOJ reduced its bond purchases, market participants would take it as a signal that it was close to exiting its easing policy, pushing yields higher and forcing it to buy more.