MHMarkets ：October 09, 2023--Fundamental Reminder

21:30  FOMC Member and Dallas Fed President Logan speaks on the U.S. economic outlook and monetary policy.

14:00 EUR Germany Industrial Production MoM s.a (AUG) (%) & EUR Germany German Industrial Production YoY w.d.a (AUG) (%)

16:30  EUR Sentix Investor Confidence (OCT)

Market Overview

Review of Global Market Trend

The dollar index jumped to near 107 after Friday's non farm payrolls report, which was almost twice as large as expected, indicating that the US labor market remains strong and reinforcing expectations of Fed tightening. However, the market trend did not last and made a dramatic reversal during the session, falling below 106 at one point and closing down 0.24% at 106.11.

Treasury yields also rose more than 10 basis points after the data, before giving up most of those gains, with the 10-year yield settling near 4.8% and the two-year yield near 5.08%.

Spot gold fell as low as $1,810.51 an ounce after the data was released, before recovering all its post-data losses to close up 0.64% at $1,832.03 an ounce. Spot silver, which fell as low as $20.82 an ounce, also surged, closing up 2.93% at $21.59 an ounce.

Crude oil briefly fell after the nonfarm break, but then similarly reversed course, with WTI crude falling as low as $80.63 a barrel to settle up 0.27% at $82.74 a barrel, while Brent crude fell as low as $83.01 a barrel to settle up 0.08% at $83.88.

The three major U.S. stock indexes reversed early losses caused by the nonfarm report to recover nearly 1%, with the Dow up 0.87%, the Nasdaq up 1.6% and the S&P 500 up 1.16%. The Nasdaq China Golden Dragon Index rose 2.61%, Pinduoduo rose more than 7%, Bilibili, JD.com and Baidu rose more than 3%, and Alibaba rose nearly 3%. The Big Three auto makers avoided a new round of strikes, with Ford Motor gaining 0.84%, GM 1.98% and Stellantis 3%. The S&P 500 snapped a four-week losing streak, rising 0.5% last week, while the Dow fell 0.3% and the Nasdaq rose 1.6%.

Major European stock indexes closed higher across the board, with Germany's DAX30 up 1.09%; Britain's FTSE 100 closed up 0.56%; The Stoxx Europe 50 index closed up 1.10%.

Market Focus

2. British media: Biden seeks to request the largest aid to Ukraine so far, possibly worth hundreds of billions of dollars.

3. Azerbaijan warns of new conflict over French military aid to Armenia.

4. An undersea gas pipeline connecting Finland and Estonia was shut down after a suspected leak.

5. Medvedev: The United States should deal with the Israeli-Palestinian issue, not create a Russia-Ukraine conflict. Ukrainian President Volodymyr Zelensky: Israel's right to self-defense is beyond question. The United Nations Secretary General Antonio Guterres has condemned Hamas attacks on Israel and urged all efforts to avoid a wider conflict. Diplomats say the UN Security Council will meet on Sunday to discuss the Israeli-Palestinian conflict.

6. Fed Governor Bowman: It will be appropriate to raise interest rates further and keep them at restrictive levels for some time. The recent US jobs report showed solid job growth in the Labour market.

7. Saudi Arabia: Willing to increase production early next year if prices rise.

Institutional Perspective

01

Former U.S. Treasury Secretary

【Former U.S. Treasury Secretary：The Fed's rate increases didn't work The risk of a hard landing for the US economy has increased sharply】

Former US Treasury Secretary Lawrence Summers said last month's US jobs figures showed the Federal Reserve's interest rate hike was not working as it used to and had increased the risk of a hard landing for the US economy, Bloomberg reported Saturday.

With job growth accelerating, the risk of a hard landing may “look a little bigger,” Mr. Summers said in an interview on Bloomberg Television. Interest rates may no longer be the tool the US uses to guide the economy that they once were, Summers said, meaning they will have to be more volatile than in the past when the economy needs to cool. Summers also warned that given the current sell-off in bond markets and elevated valuations in many markets, including private equity, the US economy is being held up on more dry firewood than before.

A year and a half ago, the Fed launched its most aggressive monetary tightening campaign in decades, raising interest rates by more than 5 percentage points, but the policy didn't bring the U.S. unemployment rate in a reasonable range. In response, Mr. Summers said the economic performance pointed to some fundamental shifts in the effectiveness of Fed policy.

02

SOCIETE GENERALE

【SOCIETE GENERALE：The CPI data is estimated to be enough to keep the Fed on hold】

Societe Generale noted that resilient US Labour market data had increased the risk that the Fed would raise rates again and had helped push long-term rates higher. However, next week's inflation data will likely show a continued moderation in core inflation. Combined with the fact that the recent tightening of financial conditions has reduced the need for further Fed action and officials are turning their attention to how long they need to hold rates steady enough to fight inflation, the Fed is expected to leave rates unchanged.

Societe General thinks CPI could keep the Fed on hold; Eyes are on core inflation data, with both core PPI and core CPI expected to provide additional evidence of a slowdown in prices. On the headline inflation measure, PPI is set to rise sharply, while CPI is expected to increase 0.3% month-over-month.

03

ECB

【ECB President Christine Lagarde：Current interest rates help bring inflation to target】

The president of the ECB Christine Lagarde said she was not pessimistic about the short-term economic outlook and that the German economy was a factor affecting the growth outlook. The ECB will succeed in keeping inflation at 2% and there is no risk of a wage-price spiral, which must be avoided. The ECB's current interest rate is helping to bring inflation, which is persistent but slowing, towards its target.