Mohicans markets：MHM Today News

☆ At 18:00, ECB President Lagarde attends an event held by the World Trade Organization.

☆At 21:15, the U.S. ADP employment figures for February are released, the expected value is an increase of 200,000, the previous value is an increase of 106,000

☆At 23:00, the Federal Reserve Chairman Jerome Powell delivers his semi-annual monetary policy testimony at the House Financial Services Committee.

☆At 23:00, the Bank of Canada announces its interest rate resolution.

☆At 23:30, the U.S. EIA crude oil inventories for the week to March 3 is released, the expected value is decreased by 308,000 barrels, the previous value is increased by 1,116,000 barrels.

☆ The next day at 3:00 am, the Federal Reserve announces the brown paper on economic conditions.

Market Overview

Review of Global Market Trend

On Tuesday, Powell's hawkish speech ignited the market. Spot gold accelerated its decline in the U.S. session, losing $1,820 per ounce and hitting a new low since Feb. 28, eventually closing down 1.8% at $1,813.08 per ounce. Spot silver fell since the European session, eventually closing down 4.64% at $20.07 per ounce.

The U.S. dollar index rose strongly, eventually closing up 1.294% at 105.64. The U.S. 2-year Treasury yield touched 5% for the first time since July 9, 2007, rising 10.40 basis points during the day. The U.S. 10-year Treasury yield touched the 4% mark and then fell back, finally closing down 0.34% at 3.97%. The 2-year U.S. Treasury yield was more than 100 basis points higher than the 10-year Treasury yield for the first time since 1981.

International crude oil fell hard as the Fed's aggressive interest rate hike clouded the demand outlook. WTI crude oil approached the 77 mark and ended down 4.12% at $77.11 per barrel, which was the biggest drop in two months, while Brent crude oil ended down 3.84% at $83.14 per barrel.

U.S. stocks were dragged lower by Powell's hawkishness, with the Dow closing down 1.72%, the Nasdaq closing down 1.25% and the S&P 500 closing down 1.53%, losing ground on its 50-day moving average level. The vast majority of sectors closed generally lower. China Concept Stock were weak, with Xiaopeng Auto closing down about 8%, Ideal Auto closing down about 6% and Azera closing down about 4%.

Major European stock indices fell across the board. Germany's DAX30 index closed down 0.6% at 15,559.53 points; Britain's FTSE 100 index closed down 0.13% at 7,919.48 points; Europe's Stoxx 50 index closed down 0.81% at 4,278.96 points.         

Market Focus

1. Federal Reserve Chairman Powell Senate hearing: if necessary, prepare to accelerate the pace of interest rate increase; The interest rate will be raised at each meeting according to the data; The next dot-matrix/terminal interest rate is likely to be higher than previously expected.

2. Market reaction: It is expected that the probability of raising interest rate by 50BP in March will soar to 65%+, the terminal interest rate will reach 5.62% in September, the US 2Y yield will break through 5%, the 2Y-10Y upside down range will reach 100BP for the first time in more than 40 years, the US index will rise sharply, silver will fall nearly 5%, and US stocks will fall more than 1%. Goldman Sachs raised its terminal interest rate forecast by 25BP, and BlackRock believed that the Federal Reserve might raise interest rates to 6%.

3. New York Times: According to the latest information reviewed by American officials, pro-Ukrainian organizations launched an attack on the Nord Stream pipeline last year.

4. The Atlanta Fed's GDPNow model lowered the US Q1 growth forecast to 2.0%.

5. Biden: It is proposed to increase the medical insurance tax rate of people with incomes above $400,000 from 3.8% to 5%.

6. Saudi Foreign Minister: The Minister of Energy believes that there is no need to change production this year; Reports of differences in relations between the United Arab Emirates and Saudi Arabia are often exaggerated.

7. The Federal Reserve of Australia raised interest rates by 25 basis points as scheduled, and raised interest rates to 3.60%. Since April 2022, it has raised interest rates by 10 times, a total of 350 basis points. The chairman of the bank said that it was approaching the point of appropriate suspension of interest rate increase.

8. A White House official confirmed to the media at an energy conference that after months of deadlock, the United States finally began to release solar panels imported from China.

Geopolitical Situation

Conflict situation:

1. President Lukashenko of Belarus: Belarus has arrested “terrorists” and their associates from the Ukrainian intelligence service because they tried to destroy the military airport of Belarus. At the order of the United States, Ukraine tried to drag Belarus into military conflict.

2. Russian Defense Minister: The occupation of Bakhmut will help promote the military action to Ukraine. The number of casualties of Ukrainian soldiers in February continued to increase, more than 11,000, more than 40% of the casualties in January.

3. Ukrainian media: Western intelligence agencies estimate that the Russian army lost 30,000 “Wagner” mercenaries in the fight for Bachmut, and one third of them died.

Energy situation:

1. German Prime Minister Schultz: A new natural gas power plant with a capacity of 17-21 gigawatts will be built, which can be operated with hydrogen in the future.

2. The US Treasury Department confirmed that the G7 Group will reassess the current price ceiling level of Russian oil, but declined to disclose whether this measure is effective.

3. According to the New York Times, the latest information reviewed by American officials shows that pro-Ukrainian organizations launched an attack on the Nord Stream pipeline last year.

4. Deputy Prime Minister of Russia: The strategic task is to develop the annual output of Russian LNG to at least 100 million tons. (At present, Russia's output is 33 million tons/year)

5. Market news: Russia plans to cut oil exports and transfers from Western ports by 10 percent in the February-March period.

6. According to dealer data, in February this year, Russia exported a record amount of diesel oil to Brazil.

7. Market news: Russia began to export diesel oil to Saudi Arabia in February.

Assistance:

1. German Cabinet Minister: Germany has no specific plan to deliver the “Leopard 2” tank to Kiev.

2. Polish Defense Minister: 10 more tanks will be delivered to Ukraine this week. Poland is ready to set up a maintenance center for Ukrainian “leopard” tanks.

3. Ukrainian media: Hungary's Ministry of Defense confirmed that it provided training for Ukrainian medical personnel, but did not support any measures that might lead to the escalation of the conflict and would not provide weapons to Ukraine.

4. Ukrainian media: From the outbreak of the conflict to the end of February this year, the amount of international assistance to Ukraine has exceeded 38 billion US dollars. Ukraine's international reserves have been increasing since October 2022.

5. The European Bank for Reconstruction and Development will consider providing up to 200 million euros of loans to the Ukrainian railway.

6. Prime Minister Trudeau of Canada: Canada will provide 3 million Canadian dollars to Ukraine for demining and extend engineering training in the autumn.

Institutional perspective

01

Goldman Sachs

Goldman Sachs raised the expectation of the Fed's interest rate increase: there is a risk of 50BP

After the Fed Chairman Powell made a speech on Tuesday, Goldman Sachs economists raised their expectations of the Fed's interest rate again. At present, the peak interest rate is expected to reach 5.5% - 5.75%. Jan Hatzius's team wrote in the report that they currently expect to raise interest rates by 25 basis points in July, in addition to the previously expected interest rate hikes of 25 basis points in March, May and June.

“We expect that the data before the March meeting will be mixed, but it is generally good, so our expectation of a 25 basis point interest rate increase in March may be more accurate, but there is also a risk of a 50 basis point interest rate increase by FOMC,” they said. They said that no matter how large the rate increase was in March, the new median forecast of the Federal Reserve's peak interest rate in 2023 was expected to rise by 50 basis points to 5.5-5.75%.

02

SOCIETE GENERALE

[SOCIETE GENERALE looks forward to the RBA's interest rate decision]

On March 6, SOCIETE GENERALE believed that the recent macroeconomic data of Australia showed signs, such as lower inflation, rebound in unemployment rate, relatively tepid wage growth and slower consumption, all supported the Federal Reserve of Australia to raise interest rates by 25 basis points in March. SOCIETE GENERALE also said that although the financial market had a more hawkish expectation of the Federal Reserve's policy, investors also supported the Bank's expectation that the terminal interest rate of the Federal Reserve of Australia would be 3.85%.

03

MUFG

MUFJ: After the Federal Reserve of Australia issued a less restrictive monetary policy signal, the Australian dollar may weaken further in the short term. The Federal Reserve of Australia stated that it was approaching the suspension of the rate increase cycle, but still planned to raise the rate at least once more. We expect to raise interest rates by 0.25 percentage points in April or May respectively.