May 29, 2023 - Fundamental Reminder

☆ OECD released its economic outlook report.

☆ London Stock Exchange is closed for one day; NYSE is closed for one day; ICE's Brent crude oil futures contract trading ends earlier at 01:30 BST on 30th; CME's precious metals and U.S. crude oil futures contract trading ends earlier at 02:30 BST on 30th; Seoul Stock Exchange is closed for one day.

Market Overview

Review of Global Market Trend

On Friday, spot gold rebounded after a new 2-month low. Before the U.S. session, gold prices retraced most of the day's gains due to the over-expected PCE data prompting traders to enhance expectations for another Fed rate hike, eventually closing up 0.31% at $1,946.33 per ounce, but still recording three consecutive weekly losses. Spot silver also bottomed out, eventually closing up 2.36% at $23.31 per ounce, ending a four-game losing streak on the daily.

The US dollar index remained largely unchanged, maintaining near its highest level in two and a half months, closing at 104.24. The 2-year U.S. Treasury yield, which is sensitive to the interest rate outlook, set a new weekly high, recording its biggest one-week gain since September last year; the 10-year U.S. Treasury yield closed slightly lower at 3.81%.

International crude oil rebounded, posting gains for the second straight week last week as more progress emerged on the debt ceiling deal and traders weighed conflicting messages from Russia and Saudi Arabia on the prospect of production cuts ahead of the OPEC+ meeting. WTI crude closed up 1.45% at $72.92 per barrel; Brent crude closed up 1.39% at $77.42 per barrel.

All three major U.S. stock indexes were in the red, with the Nasdaq initially closing up 2.19%, the S&P 500 up 1.31% and the Dow up 330 points. Semiconductor sector continued to be strong, star technology stocks closed up across the board, Qualcomm and Micron Technology rose more than 6%, Intel and Netflix rose more than 5%, Tesla rose nearly 4%; Pinduoduo closed up nearly 19% after the performance.

European shares of the main stock index collectively closed up, Germany DAX30 index closed up 1.2%; Britain's FTSE 100 index closed up 0.74%; European Stoxx 50 index closed up 1.59%.

Market Focus

1. U.S. Debt Ceiling - The two sides reached an agreement in principle that reportedly will suspend the debt ceiling for two years and keep non-defense spending flat for two years. There are people in both parties who are unhappy with this agreement, and the text is expected to be released Monday morning GMT, with a vote in the House on Wednesday and the Senate on Friday or over the weekend.

2. Federal Reserve Goolsbee: Inflation has made progress but has not yet succeeded, and raising the debt ceiling is a relief.

3. Turkey's Supreme Electoral Board: Preliminary results show Erdogan won the presidential election.   

Geopolitical Situation

Conflict Situation

1. According to the Kyiv Independent: In the early hours of May 28, Russia launched its 14th drone strike on Kiev this month, with Kiev's air defenses destroying more than 20 drones. A man has been killed and three others injured in Kiev after being hit by debris from a drone. Other media reported that the Russian military launched a record 54 “Shahed” suicide drones into Ukraine, of which 52 were shot down.

2. Russian Defense Ministry: The “Eastern” Group thwarted the attempted Ukrainian offensive in the direction of South Donetsk, destroying two mortar crews, one anti-tank crew, effective forces and two positions in the settlement area.

3. According to Kyiv Independent: Zelensky signed a decree approving sanctions against 220 companies and 51 individuals linked to Russia's military-industrial complex.

4. Ukrainian media: The Ukrainian army has begun training in Germany to drive Abrams tanks.

5. Ukrainian media: The Ukrainian army will receive the Swedish Archers artillery system this summer.

6. German Foreign Ministry: Russia has asked hundreds of German civil servants to leave the country.

7. According to a joint statement obtained from the Montevideo South American Integration Seminar, left-wing South American leaders believe that the region can help end the conflict between NATO and Russia.

8. Brazilian President Luiz Inacio Lula da Silva tweeted on May 26 that he had turned down Russian President Vladimir Putin's invitation to visit Russia. He thanked him and said he “cannot go to Russia for now”, but would continue to call for and seek peace.

9. Iran's Foreign Ministry spokesman criticized Zelensky's comments on aid to Russia as an attempt to attract Western arms.

10. Russian media: Turkish President Recep Tayyip Erdogan promised to implement the gas hub project proposed by Putin.

Institutional Perspective

01

Goldman Sachs

【Goldman economist backtracks: Probability of Fed pausing and continuing rate hikes in June now 'even'】

On May 27, economists at Goldman Sachs Group Inc. still expect the Federal Reserve to pause interest rate hikes in June, but said the probability is now “about even” with the probability of not doing so. “While we continue to expect the Fed to pause in June, this morning's stronger-than-expected consumer spending and inflation data, combined with a wide range of views among FOMC participants on the appropriate policy path, all make it a close call [and the probability of no pause],” the economists, led by Jan Hatzius, wrote in the report.

02

SOCIETE GENERALE

The BOJ is expected to raise its 10-year yield target range by 50 basis points to 1 per cent at its next meeting.

03

MUFG

Mitsubishi UFJ: The dollar is being held back by two factors

Federal Reserve Chairman Jerome Powell's speech on Friday did not strongly disagree with market expectations of a rate cut by the end of the year, nor did he give a strong signal of a rate hike at the June meeting, Bank of Mitsubishi UFJ said. Since then, US interest rate markets have scaled back their expectations of a Fed rate hike in June and are now only pricing in a rise of about 2 basis points. The dollar fell after that. Another setback for the dollar was the collapse of U.S. debt ceiling talks, although the breakdown was short-lived as U.S. President Joe Biden said a phone call with House Speaker Kevin McCarthy “went well.”