Mohicans markets：MHM Today News

February 15, 2023 - Fundamental Reminder

☆ At 21:30, the United States will release the January retail sales data known as “terrorist data”, which is expected to record 1.8%.

☆ At 22:00, President Lagarde of the European Central Bank will make a speech. At present, the market expects that the European Central Bank will continue to raise interest rates by 50 basis points in March. It is necessary to note whether Lagarde will mention the pace of interest rate increase of the European Central Bank after March.

☆ At 23:30, the United States will announce the EIA crude oil inventory for the week of February 10, and the market is expected to increase 321,000 barrels.

Market Overview

Review of Global Market Trend

On Tuesday, under the influence of more stubborn inflation than expected, spot gold fluctuated significantly in the US market. After the short-term bottom, it jumped more than $20, and once touched the 1870 level, but then fell again, and once fell below the 1850 level, and finally closed up 0.04% to 1854.36/ounce; Spot silver once stood at the $22 level, but failed to stand here, and finally closed down 0.62% at $21.85/ounce.

The US dollar index showed a “N” trend in the intraday and ended down 0.02% at 103.25; The yield of 10-year US Treasuries rose to a high of 3.755%, and the yield of five-year US Treasuries once exceeded 4%, the first time since December 30 last year.

In terms of crude oil, WTI crude oil fell more than 2% and fell below US $78, then recovered some of the lost land, and finally closed down 0.38% to US $78.80/barrel; Brent crude oil fell to a low of US $84.11 and ended down 0.59% at US $85.25/barrel.

US stocks ended mixed, with the Dow down 0.46%, the Nasdaq up 0.57% and the S&P 500 down 0.03%. Most of the star tech stocks ended higher, Tesla up about 7%, NVIDIA up about 5%, and TSMC up about 2%.

European stocks were flat, with Germany's DAX30 index closing down 0.10% at 15381.95; The FTSE 100 index of the UK rose 0.04% to 7950.75; The European Stoxx 50 Index closed down 0.01% at 4240.75.

Market Focus

1. U.S. January CPI slowed down, but it was slower than expected. With the impact of the previous strong employment data, the market turned back to the guidance given by the Federal Reserve in December last year, that is, the expected interest rate by the end of the year was 5.1%, but the market gradually questioned its inflation target of 2%.

2. Buffett sold 86% of TSMC's position in Q4, causing TSMC to fall about 4% after the market.

3. Biden formally appointed Brainard as the director of the Economic Advisory Committee, who will step down as the vice chairman of the Federal Reserve around February 20.

4. The Japanese government has officially nominated Kazuo Ueda as the next governor of the Bank of Japan, and Shinichi Ueda and Yoshihiro Ichimano as vice governors.

5. OPEC Monthly Report: The growth rate of global crude oil demand this year is predicted to be 2.3 million barrels per day, and the net import of Chinese petroleum products is 11.19 million barrels per day.

6. The daily drop of the Baltic Dry Bulk Freight Index was the largest in nearly six months and reached a new low in nearly three years.

7. CME will launch the Bitcoin futures contract on March 13, and is currently awaiting the review of the regulatory authorities.

8. According to the Reuters/Ipsos survey, Biden led the Democratic Party's presidential nomination in 2024 with 35% support; Senator Bernie Sanders was 13%.

9. Suez Canal Authority of Egypt: Since April 1, the surcharge for crude oil tankers loaded will be adjusted to 25% of the normal transit fee, and the surcharge for others will be adjusted to 15%.

10. Speeches by Federal Reserve officials - Williams: Recent data support further interest rate increases, which may be reduced in the next two years to reflect the lower inflation at that time; Logan: QT will continue for a long time; Balkin: Pay attention to the lag of interest rate increase. The risk of doing too much is greater than that of doing too little; The above officials all said that they may need to raise interest rates more than expected; Huck: Now we will not change the inflation target. We need to maintain the 25BP interest rate increase path, which is close to the end of the interest rate increase cycle.

Geopolitical Situation

Conflict Situation：

1. According to TASS News Agency, Ukraine has increased its troops to the direction of Zaporoge by 5000, but the situation along the line of fire is still stable.

2. British military intelligence agency: In the past three days, Wagner Group has made further “small progress” in the town of Bachmut, the northern suburb of Dunbas; Russia's goal may be to push westward to the Geberetz River.

3. US Defense Secretary Austin: Ukraine is expected to launch an attack sometime in the spring. Ukraine's allies will provide Ukraine with as much ammunition as possible as soon as possible.

Energy Situation：

1. The source said that due to the storm, the oil loading activities at the port of Novorossisk in the Black Sea of Russia had been suspended on February 14.

2. Kremlin: President Putin and President of Azerbaijan discussed the development of Russia-Arab economic and trade cooperation, including energy, transportation and other projects.

Assistance Situation：

1. According to the Washington Post, the White House is working hard to approve the $10 billion budget assistance to Ukraine, and plans to announce a new package of military assistance next week.

2. NATO Secretary General Stoltenberg: The type of support we provide to Ukraine will change with the development of the situation; The issue of fighter aircraft is still under discussion.

3. The source said that the United States announced that it would probably provide aircraft to Ukraine as time went by.

4. Norwegian Ministry of Defence: Norway provided 8 tanks to Ukraine.

5. The German Defense Minister said that Germany would deliver the two sets of IRIS-T air defense systems previously promised to Ukraine in the next few months.

6. Denmark and the Netherlands will not supply Leopard 2 tanks to Ukraine, but will participate in the repair and maintenance of Leopard 1 tanks.

Institutional Perspective 

01

Goldman Sachs

The regulatory environment is creating greater resistance for larger transactions.

02

SOCIETE GENERALE：The EURUSD is bullish for a long time.

After the market interpreted the European Central Bank's interest rate decision in February as a dove, the rise of the euro against the dollar stopped abruptly. Economists from Faxing Bank pointed out that in the long run, the EURUSD still points upward. Technically, the possibility of further profit taking cannot be ruled out. The European Central Bank may try to correct the dove interpretation of the market's interest rate decision and statement in February, which may attract euro buying, but confidence may remain low until the US CPI is released next week. Due to the improvement of its own terms of trade, the boost of China's economic growth, the narrowing of the policy interest margin of the Federal Reserve/European Central Bank and the attractive valuation, the long-term trend of EURUSD is still inclined to rise. The main downside risks are the new offensive launched by Russia against Ukraine, the further deterioration of relations between Russia and the West and the interruption of energy supply in Europe.

03

MUFG：The dollar has recovered most of its losses since the beginning of the year.

Mitsubishi UFJ Financial Group said in a report that the US dollar continued to strengthen and reached its highest level against a basket of currencies in nearly four weeks after the release of the better-than-expected US employment data last Friday, as the US economy looked more resilient and there might be more interest rate hikes. Market participants have begun to price the possibility that the Federal Reserve will raise interest rates at least twice by 25 basis points before suspending the rate increase cycle. The US interest rate market has lowered its expectation of starting to cut interest rates later this year, so the US dollar has recovered most of the decline since the beginning of the year.