MHMarkets ：MHM Today News

May 4, 2023 - Fundamental Reminder

☆ 09:45 CNY Caixin Manufacturing PMI (APR)

☆ 19:30 USD Challenger Job Cuts (APR)

☆ 20:15 EUR ECB Interest Rate Decision 

The market is expected to raise interest rates by 25 basis points, and if it exceeds expectations by 50 basis points, then it will likely indirectly affect the dollar index and gold, and the market should pay more attention to it.

☆ 20:30 USD Unemployment Claims (APR/29)& USD Balance of Trade (MAR)

☆ 20:45 EUR ECB Press Conference

☆ 22:00 USD New York Fed Global Supply Chain Stress Index (APR)

☆ 22:30 USD EIA Natural Gas Stocks Change (APR/28)

Market Overview

Review of Global Market Trend

Early this morning the Federal Reserve raised interest rates by 25 basis points to 5%-5.25% as expected, which was the 10th consecutive rate hike since March last year, with rates reaching their highest level since August 2007; however, the Fed hinted at a pause in rate hikes, and the dollar index was once forced down to the 101 mark during the day after the resolution was announced, closing down 0.56% at 101.28.

U.S. bond yields expanded after the resolution, two-year U.S. bond yields fell nearly 17 basis points to a three-week low, from 3.97% to near 3.80% during the day; 10-year U.S. bond yields fell from 3.43% to 3.34%.

Spot gold rallied after the resolution was announced, but continued to pull up during Powell's speech, once standing at the $2040 mark, up more than $30 from the intra-day low, closing up 1.14% at $2039.56 per ounce. Spot silver was once forced under the $25 mark during the session, then shocked higher, closing up 0.78% at $25.57 per ounce.

Crude oil continued to be suppressed by concerns about the global economy heading into recession and was “bloodied” again. WTI crude oil fell more than 5% during the day and lost $68, hitting a new low of nearly 6 weeks, closing down 4.77% at $68.08 per barrel. Brent crude oil once fell nearly 5% to close down 4.35% at $71.9 per barrel, a new low since March 20. U.S. and Brent oil have fallen three days in a row this week, with cumulative declines of more than 10%.

U.S. stocks extended their losses in late trading, with the Dow closing down 0.8%, the Nasdaq closing down 0.46%, the S&P 500 closing down 0.7%, and the U.S. Westpac Hopewell Bank's stock price cut after the bell, extending its decline to 55%. Top Chinese stocks were mixed, with Azera Motors and Boss Direct closing up 2% and Ctrip closing down 4%.      

European stocks were mixed, Germany's DAX30 index closed up 0.59%; Britain's FTSE 100 index closed up 0.19%; France's CAC40 index closed up 0.28%; Europe's Stoxx 50 index closed up 0.36%; Spain's IBEX35 index closed down 0.05%; Italy's FTSE MIB index closed up 0.75%.

Market Focus

1. The Fed raised rates by 25BP as expected in the early morning and hinted that it could suspend rate hikes, Powell refuted the expectation of rate cuts, but the market still insisted on the expectation of cumulative rate cuts of 75BP by the end of the year.

2. Westpac Hopewell Bank is reportedly considering selling itself, fearing that no one is willing to take over in full. The stock's after-hours share price cut, spot gold by panic worries in the Asian opening once broke a record high; WTI crude oil once fell more than 5%, and this happened a few hours after the Federal Reserve reaffirmed the soundness of the banking sector.

3. The U.S. Treasury kept the size of quarterly bond issues unchanged, while unexpectedly announcing the launch of a buyback program for old debt in 2024.

4. The White House assessment of debt default “doomsday” scenario: the stock market fell 45%, 8.3 million people out of work.

5. SEC officials: will not consider banning short-selling, despite market concerns about the financial health of banks to suppress the stock market.

6. The SEC proposed new rules: large hedge funds will face a 72-hour time limit for reporting significant losses to regulators.

7. South Korean President Yoon Seok-yeol: will expand the shuttle diplomacy of Korea-Japan cooperation (shuttle diplomacy).

8. U.S. ADP employment increased by 296,000 in April, which was the largest increase since July 2022.

9. The Kremlin says Ukraine attempted to attack the Kremlin with two drones overnight; Medvedev calls for the “physical elimination” of Zelensky; the Ukrainian side denies the attack allegations.

10. Russian Deputy Prime Minister Novak: the fall in oil prices may be short-term and needs to be studied in detail to determine the possible response of OPEC+. The proportion of idle oil wells in Russia is reported to have reached the highest level in 10 months in March.

Assistance Situation：

1. Expanded defense commitments and support for Ukraine on the part of New Zealand.

2. Joint statement by Zelensky and the Nordic governments that the EU member states among the Nordic countries will strongly support Ukraine and meet its requirements to start accession negotiations as soon as possible.

3. U.S. Secretary of State Blinken issued a statement that he approved the allocation of $300 million worth of arms and equipment to Ukraine.

4. Canada provides Ukraine with $16.5 million worth of mine-clearing equipment.

Food Situation：

1. Turkish Defense Minister: The deputy defense ministers of Russia, Ukraine and Turkey will meet in Istanbul on Friday to discuss the grain deal.

2. Russian Foreign Ministry spokeswoman Zakharova: Negotiations between Russia and the United Nations on the Black Sea grain deal will be held in Moscow on May 5. President Vladimir Putin will go to Moscow for the negotiations on the grain deal.

3. Ukrainian President Zelensky: sees no interest in Russia continuing the grain deal.

Institutional Perspective

01

Goldman Sachs

As we expected, the FOMC sent a clear message that it would maintain a hawkish bias while hinting that it would suspend rate hikes in June.

02

SOCIETE GENERALE

Societe Generale: S&P 500 uptrend will continue once it breaks 4195/4220

May 3, Societe Generale said the S&P 500 is close to key graphic resistance 4195/4220, representing the February peak and the previous gap down. It has been within a bottom since October. Notably, the 50-DMA has crossed above the 200-DMA, forming a golden cross; this points to a potential upside. A breakout to the upside looks imminent. Once the index builds above 4195/4220, expect the uptrend to continue. The next potential targets could be last August's highs of 4320 and 4510.

03

MUFG

George Goncalves, head of U.S. macro strategy at Mitsubishi UFJ: This FOMC statement is consistent with the Fed's statement in 2006, when the Fed pushed the federal funds rate up to a peak of 5.25%. They never said outright “we're done (raising rates),” but in my opinion, this is the closest they've come to doing that.