MHMarkets：December 6, 2023,--Fundamental Reminder

TBD Russian President Putin visits the UAE and Saudi Arabia

21:15 USD ADP Employment Change (NOV)

23:00 CAD BOC Interest Rate Decision

23:30 USD EIA Crude Oil Stocks Change (DEC/01) & USD EIA Cushing Crude Oil Stocks Change (DEC/01) & USD EIA Strategic Petroleum Reserves Change (DEC/01)

Market Overview

Review of Global Market Trend

On Tuesday, as the job market showed new signs of cooling, U.S. bond yields intensified the downtrend, the 10-year U.S. bond yields fell below the 4.2% mark, hitting a three-month low, closing at 4.167%; the two-year U.S. bond yields, which are more sensitive to Fed policy rates, closed at 4.577%. The U.S. dollar index extended its rally, hitting 104 upward during the session, a new high since November 22. It closed up 0.309% at 103.95.

Spot gold continued to pull back as the dollar stabilized again, at one point falling back below $2,010 per ounce and shedding more than $30 from its daily high. Losses narrowed towards the end of the day, eventually closing down 0.55% at $2018.64 per ounce. Spot silver held on narrowly above $24 per ounce, eventually closing down 1.35% at $24.16 per ounce.

Since the OPEC+ meeting announced a new round of additional production cuts, international crude oil moved lower for the fourth consecutive session, falling to a five-month low. WTI crude oil closed down 1.68% at $72.19 per barrel; Brent crude oil closed down 1.48% at $77.31 per barrel.

The three major U.S. stock indexes were modestly volatile, with the Dow closing down 0.22%, the Nasdaq up 0.3%, and the S&P 500 down 0.06%. AAPL.O and NVDA.O closed up more than 2%, with AAPL.O market capitalization returning to $3 trillion. The Nasdaq China Golden Dragon closed down 1.5%, JD.O, IQ.O and DOYU.O all fell more than 1% and NIO.N closed up 1.4%.

Market Focus

1. The U.S. October JOLTS job openings recorded 8.733 million, much lower than the expected 9.3 million, which was the lowest since March 2021. The U.S. November ISM services index picked up due to increased business activity, rising to 52.7, which was higher than expected.

2. Saudi Arabia cut the price of Arabian light crude oil for Asia by 50 cents, lowering the price of all crude oil for Asia in January.

3. Russian Deputy Prime Minister Novak said OPEC+ countries are ready to cut oil production further in the first quarter of 2024 to avoid speculation and limit volatility in global markets.

4. The Kremlin: Russian President Vladimir Putin will visit the United Arab Emirates and Saudi Arabia on Wednesday, and the trip will last a day.

5. The Israeli army chief of general staff announced that the Gaza Strip ground military operation into the “third phase”. Yemen's Houthi forces: if Israel continues to provoke, will blockade the Bab al-Mandeb Strait.

6. The Australian Federal Reserve will keep the cash rate unchanged at 4.35%, in line with market expectations.

7. UK interest rate futures priced the probability of the Bank of England's first rate cut in May at more than 60%.

Institutional Perspective

01

Barclays

【Barclays cautiously predicts that the Fed may cut interest rates four times next year】

With the Fed's rate hike cycle nearing its end, major investment banks have made predictions about the Fed's path of interest rate cuts. Barclays' latest forecast is that the Fed may cut rates four times next year, with a cumulative 100 basis points.

The bank said in a report released on Monday, the U.S. economy will remain resilient next year, which will allow the Fed to be cautious in cutting interest rates. The market is now generally predicting that U.S. economic growth will slow sharply next year, with real GDP growing at an annualized rate of just 0.4% in the first quarter and 0.3% in the second quarter, well below the average estimate of 2.5% for 2023. At the same time, job growth is also expected to cool sharply, with U.S. inflation expected to fall close to the Fed's 2% target by 2024. However, this means that the U.S. may avoid a recession, although the likelihood of a recession is still looking high right now.

02

Goldman Sachs

【Goldman Sachs: The market is too optimistic】

A Goldman Sachs research report recently noted that financial markets are overly optimistic about how much the Fed will cut interest rates next year, giving options traders the opportunity to make a profit by being a contrarian.

Strategists, including Praveen Korapaty, wrote in a newly released report that the market expects the Fed to cut rates by 125 basis points over the next 12 months, with a 50 basis point cut by the end of June (a sign that the U.S. economy is already on the brink of recession). That's much more aggressive than Goldman Sachs' own forecast, which sees only one rate cut in 2024, by 25 basis points.

03

HSBC Bank

【HSBC: The Fed may cut interest rates in the third quarter of next year, and high-quality bonds will become the most attractive assets】

HSBC Global Private Bank expects the Fed to start cutting interest rates in the third quarter of next year, and expects the federal funds rate to fall to 4 to 4.25% by the end of 2025. Coupled with the soft landing of the US economy, the rebound of corporate earnings, and the solid growth of the Asian economy, the investment outlook for global risk appetite and equity and bond markets will improve next year. Looking ahead to the next six months, HSBC will adopt a moderate investment strategy, reducing cash holdings and maintaining a moderate overweight allocation to U.S. Treasuries, global investment grade bonds and hedge funds. HSBC Global Private Banking and Wealth Management Asia Chief Investment Officer Fan Zhuoyun said, this year's bond market after a significant repricing, high-quality bonds will become the most attractive asset class in the first half of next year.