Mohicans markets：MHM Today’s News

December 20, 2022-Fundamental Reminder

☆ 08:30 The Australian Federal Reserve releases the minutes of its December monetary policy meeting.

☆ 09:15 China announces one-year loan prime rate through Dec. 20.

☆ 11:00 Bank of Japan announces interest rate resolution.

☆ 14:30 BOJ Governor Haruhiko Kuroda holds a press conference.

☆ The following day at 03:30 New York crude oil January futures complete the last trading on the floor.

MHMarkets -Market Overview

Review of Global Market Trend

On Monday, December 19, the dollar index surged to 104.95 in early U.S. trading, turning up again in late trading, but still did not recover the 105 mark, closing down 0.17% at 104.66. The euro returned to 1.06 against the dollar, the pound rose above 1.22 against the dollar, and the dollar rose above 137 against the yen.

U.S. bond yields rose collectively, with the 10-year U.S. bond yield rising by up to 12 basis points to 3.60%. The two-year bond yield rose 8 basis points to 4.26%, a one-week high. 2/10-year U.S. bond yield curve inversion narrowed to more than 67 basis points, but still indicates that the market is worried about the coming recession.

Spot gold lost the $1,790 mark, closing down 0.3% at $1,787.72 per ounce. Spot silver fell below the $23 mark, closing down 1.02% at $22.99 per ounce.

Crude oil shocks up, U.S. crude oil, Brent crude oil intraday gains of more than 2%. WTI crude oil intraday breakthrough $76 per barrel, closing up 1.78% at $75.80 per barrel; Brent crude oil on the $80 mark, closing up 1.24% at $80.14 per barrel. European benchmark Dutch TTF natural gas futures fell nearly 8% in late trading to a one-month low after the European Union reached a consensus on natural gas price limits, losing €110 per MWh. NYMEX U.S. January natural gas futures fell 12%, losing $6 per million British thermal units.

U.S. stocks fell for the fourth straight day as investors worried that the Fed's monetary policy tightening could send the U.S. economy into recession, with the Dow closing down 0.49%, the Nasdaq closing down 1.49% and the S&P 500 closing down 0.91%. Cruise stocks, airline stocks and most other sectors performed weakly. Tesla hit another two-year low. Peng Auto and Beeper closed down about 6%, and NextEV closed down about 5%.

European stocks generally closed higher, Germany's DAX30 index closed up 0.34%, Britain's FTSE 100 index closed up 0.41%, France's CAC40 index closed up 0.32%, the European Stoxx 50 index closed up 0.19%, Spain's IBEX35 index closed up 0.30%, Italy's FTSE MIB index almost closed flat.

Hot spots in the market

1. The Capitol Hill Special Commission investigating the riots is expected to file criminal charges against President Trump.

2. Chairman of the Banking Committee of the US Senate: US regulators may consider banning cryptocurrencies.

3. The regulator is reviewing the restart plan of Keystone Bookfriend Pipeline in the United States and Canada.

4. EU countries agreed to start the price ceiling of natural gas of 180 euros/megawatt hour from February 15 next year.

5. Intercontinental Exchange: The EU gas price ceiling endangers financial stability. Details of the EU gas price ceiling and its feasibility will be reviewed.

6. Chief Cabinet Secretary Matsuno: There is no plan to modify the joint agreement with the Bank of Japan.

7. Vice President of the European Central Bank Guindos: The European Central Bank will continue to raise interest rates by 50 basis points.

Geopolitical situation

Conflict situation:

1. Ukrainian media: The Ukrainian armed forces hit two Russian helicopters and two command posts.

2. Russian Ministry of Defense: Four American made “Ham” anti radiation missiles were shot down in the Belgorod region of Russia.

3. Ukraine said it shot down 30 of the 35 Russian UAVs overnight.

4. On December 19 local time, several explosions were heard in Kiev, the capital of Ukraine.

5. Putin instructed the secret service departments to maintain regular control over the large-scale residential areas and strategic infrastructure of citizens. The work of border defense departments needs to be strengthened. The borders of the Russian Federation should be protected reliably and attempts to violate the borders should be stopped quickly and effectively.

6. Ukrainian Atomic Energy Agency: Russian UAVs were found over the nuclear power plant in southern Ukraine on Monday morning.

Energy situation:

1. EU countries agree to start the price ceiling of natural gas of 180 euros/megawatt hour from February 15 next year.

2. Intercontinental Exchange: The EU gas price ceiling endangers financial stability. Details of the EU gas price ceiling and its feasibility will be reviewed.

3. The National Energy Corporation of Ukraine announced that at present, there is a shortage of electricity in Ukraine, and the staff are making rush repairs. Emergency power cuts have been taken in 10 regions throughout Ukraine, including the capital Kiev. 

4. Minutes of the meeting of the Central Bank of Ukraine: If the power system suffers more damage, Ukraine's GDP may decline further in 2023.

5. Shulginov, Minister of Energy of Russia: Russia will make the same decision as the oil price ceiling in response to the EU's gas price ceiling.

6. JODI data from the Joint Petroleum Database showed that Russia's oil output fell by 107000 barrels per day in October to 9.88 million barrels per day.

Institutional perspective

1. Goldman Sachs：The RMB may rise slightly to 6.9 against the US dollar in the next 12 months.

2. SOCIETE GENERALE：The Bank of England is expected to raise interest rates twice by 50 basis points.

Following the 75 basis points interest rate hike in November last year, the Bank of England Monetary Policy Committee raised interest rates by 50 basis points as expected by the market. But this time, two members voted to keep the interest rate unchanged, which made the market doubt whether the interest rate would be increased by 25 basis points in the next step. We are skeptical about this, because the views of the six members who voted for a 50 basis point interest rate increase remain basically unchanged from the last meeting, while the other member who disagreed wants a 75 basis point interest rate increase. We adhere to the current view that the interest rate will be increased by 50 basis points twice, reaching a peak of 4.5% on March 23. However, it is possible to increase the interest rate by only 25 basis points in the next increase.

3. MUFG：The Federal Reserve alone cannot reverse the bearish trend of the dollar

Economists at MUFG said the Federal Reserve was unlikely to reverse the bearish trend alone. After the hawkish statement issued by the Federal Reserve overnight, the dollar remained strong for the day. However, Mitsubishi UFJ believes that the Federal Reserve will again slow down the pace of interest rate increase to 25 basis points in February next year. The hawkish policy update of the Federal Reserve will provide more support for the dollar in the short term, but since the CPI fell back in October, the downward trend of the dollar is unlikely to be reversed by the Federal Reserve alone.

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