Mohicans markets：MHM Today News

December 15, 2022 - Fundamentals Reminder

☆ At 16:30, the Swiss Central Bank announced the interest rate resolution; 17: The Swiss Central Bank held a press conference.

☆ At 20:00, the Bank of England announced the interest rate resolution and meeting minutes. The Bank of England is expected to continue to raise interest rates by 50 basis points.

☆ 21:15 The European Central Bank announces the interest rate resolution. The market expects that the European Central Bank will slow down the rate of interest rate increase to 50 basis points. It is expected that the European Central Bank will start to reduce its balance sheet, with an average monthly reduction of 25 billion euros.

☆ 21:30 The US announced the number of initial jobless claims in the week to December 10, the monthly rate of retail sales in November, the manufacturing index of the Federal Reserve of New York in December, and the manufacturing index of the Federal Reserve of Philadelphia in December. 

☆ At 21:45, ECB President Lagarde held a press conference.

☆ At 23:30, the US announced EIA natural gas inventory in the week of December 9.

Market Overview

Review of global market trend

On Wednesday (December 14), the Federal Reserve slowed the rate increase to 50 basis points as scheduled. The dollar index rose to 104.2 after the resolution was issued, and then fell below 104 again, closing down 0.36% at 103.62. Non US currencies generally rose again after a short decline. The euro stood at a six-month high of 1.068 against the US dollar, the pound stood at 1.24 against the US dollar, and the US dollar once fell below 135 against the Japanese yen.

After the Federal Reserve announced the interest rate increase, the spot gold plunged 14 dollars in a short time, briefly falling below the 1800 threshold, and then returned to above 1810 again. Powell fell back after his speech, and finally closed 0.18% lower at 1807.44 dollars/ounce. Spot silver fell below the $24 mark and closed 0.88% higher at $23.94/oz.

The crude oil remained volatile higher throughout the day, with WTI crude oil approaching US $78, up 2.96% to US $77.38 per barrel; Brent crude oil closed 3.02% higher at US $82.80/barrel.

The US stock market opened lower and moved higher. With the resolution of the Federal Reserve and Powell's speech interpreted as hawkish, the US stock market fell rapidly in the session, and maintained its decline in the late session. The Dow closed 0.42% lower, the Nasdaq closed 0.76% lower, and the S&P 500 closed 0.61% lower.

Most European stocks ended lower, with Germany's DAX30 index closing 0.24% lower, Britain's FTSE 100 index closing 0.09% lower, France's CAC40 index closing 0.21% lower, Europe's Stoxx 50 index closing 0.28% lower, Spain's IBEX35 index closing 0.41% higher, and Italy's FTSE MIB index closing 0.28% lower.

Market Focus

1. Fed FOMC statement and Powell's speech: 50BP rate hike as expected, the terminal rate revised up to 5.1% while the whole line upward future inflation forecast, the U.S. GDP growth rate next year is expected to be only 0.5% and will not cut rates. The size of the next rate hike depends on data and the job market.

2. Post-meeting market expectations: as of this morning, the market pricing the Fed will reach a terminal rate of 4.86% in May next year, with a 25% probability of a 50BP hike in February and 50BP of room for a rate cut by the end of next year, which is 80BP away from the Fed's 5.1% guidance.

3. The SEC plans to overhaul stock trading rules, and the new rules will affect all aspects of trading.

4. World Health Organization Director-General Tan Desai: Hopefully, the new crown epidemic will no longer be an international public health emergency sometime next year.

5. [Data] U.S. EIA crude oil inventory increase for the week to Dec. 9 recorded the largest since the week of March 5, 2021; U.K. CPI monthly rate for November recorded 0.4%, the smallest increase since January 2022.

Geopolitical Situation

Conflict Situation:

1. Kiev Mayor: Air defense systems shot down a total of 10 Iranian-made drones on Wednesday morning.

2. According to local witnesses, there was an explosion in Kiev, the capital of Ukraine, on July 14.

3. The Kremlin says it has not received any proposals for a ceasefire in Ukraine over Christmas and the New Year.

4. US National Security Council spokesperson: There is no indication that the Russia-Ukraine conflict will end by the end of the year.

Energy Situation:

1. The Council of the European Union and the European Parliament have reached a provisional agreement on the “REPowerEU” energy plan, which aims to reduce energy dependence on Russia.

2. Lithuanian President: 200 euro gas price ceiling level is more acceptable.

3. National Energy Company of Ukraine: The power system of Ukraine is still facing a serious situation and the power shortage is still serious.

4. Canada says it has decided to revoke its time-limited Nord Stream sanctions exemption, which allows turbines to be repaired in Montreal and returned to Germany. The decision was taken after close communication with Ukraine, Germany and other European Allies.

Institutional Perspective

1. Goldman Sachs：Inflation below interest rates and sustained may be the restrictive policy.

2. SOCIETE GENERALE：The Bank of Canada is expected to raise rates by 50 basis points to 4.25%, a decision that may trigger subconscious buying of the Canadian dollar.

3. MUFG：The 2023 dot plot rate forecast is clustered above 5%, with only two points below that level, indicating that FOMC members are on the same page. The implications for the market are that they will not take risks until the economy, the market, or both are in trouble, unless aggregate demand is reached, wages are lowered, and the possibility of a wage-price spiral is cut off.

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