MHMarkets：December 18, 2023,--Fundamental Reminder

17:00 EUR Germany IFO Business Climate (DEC)

21:30 2023 FOMC Member and Chicago Fed President Goolsbee Interviewed on CNBC

23:00 USD NAHB Housing Market Index (DEC)

Market Overview

Review of Global Market Trend

Last Friday, the dollar index in the U.S. trading session rose sharply, because the Fed Williams hawk hit the market optimistic rate cut expectations. It finally closed up 0.63% at 102.59, but still hit a month of the worst weekly performance. 10-year U.S. bond yields rose to 3.973% of the day's highs, and ultimately closed at 3.915%; on the Fed's policy rate is more sensitive to the two-year U.S. bond yields closed at 4.449%.

Affected by U.S. bond yields and the dollar higher, spot gold plunged during the session, and fell below the 2040, 2030, 2020 mark in succession, and finally closed down 0.82% at $2019.71 per ounce; spot silver closed down 1.25% at $23.87 per ounce.

As signals about next year's oil demand were mixed, international crude was caught in a range. WTI crude ended up 0.21% at $71.74 per barrel; Brent crude ended up 0.33% at $76.86 per barrel.

The U.S. Dow rose 0.15%, continuing to hit a new closing high for the seventh consecutive session of gains. The Nasdaq rose 0.35%, the S&P 500 fell 0.01%, last week's cumulative gain of 2.49%, which was the seventh consecutive week of gains. The Nasdaq 100 gained 0.52%, breaking above its November 2021 high for a new closing high. Large technology stocks rose, Oracle rose 3%, Broadcom, Intel rose more than 2%, Amazon, Tesla, Nvidia and Microsoft all rose more than 1%. Jingdong closed up more than 4%, Ali rose more than 2.7%, Azure rose more than 1.5%, and Xiaopeng fell more than 7%.

Major European stock indices were mixed. Europe's Stoxx 50 closed up 0.23%, Germany's DAX 30 closed flat and Britain's FTSE 100 closed down 0.95%.

Market Focus

1. The Fed New York Fed President Williams strongly attacked the market's expectations for a rate cut, saying that the Fed is not really discussing a rate cut at this time and that it is too early to consider a rate cut in March of next year. Atlanta Fed President Bostic said he expects two 25-basis-point rate cuts in 2024, with the first coming “sometime” in the third quarter, provided progress on inflation expectations continues. Chicago Fed President Goolsbee said it was too early to declare victory in the fight against inflation and not to play the game too soon.

2. The Fed's demand for reverse repos hit its lowest level since June 2021.

3. The U.S. asked Israel to reduce the intensity of the military conflict in Gaza in the near future. Egyptian sources say Israel and Hamas are open to a renewed ceasefire.

4. Red Sea merchant ships frequently attacked, a number of countries in the Red Sea waters shot down drones, analysts: Israeli-Palestinian conflict spillover ripples international maritime transportation.

5. Russian Deputy Prime Minister Novak: Russia's oil exports in December or will further cut about 50,000 barrels per day.

6. Russia's central bank will raise the benchmark interest rate by 100 basis points to 16.00%, in line with market expectations.

7. Russia's Ministry of Finance: January 1 next year, oil export tariffs will be reduced from $24.7 per ton to zero, while gasoline and naphtha export tariffs also reduced to zero.

8. Sources: ECB policymakers are not expected to change the message about stabilizing interest rates before the March meeting next year, and policymakers say it will be difficult to make a rate cut before June.

9. The Russian Lianta network: the European Union and Kiev's forecasts show that the funds left in the Ukrainian treasury has been insufficient for the country's use in the next three months, Ukraine may go bankrupt before March 1 next year. The Russian foreign minister said there have been a number of Western leaders in contact with him on potential negotiations to end the Russia-Ukraine conflict.

Institutional Perspective

01

UniCredit

【UniCredit: It is expected that the BOE will cut rates later than Fed and ECB】

UniCredit said the BOE on Thursday hawkishly kept interest rates unchanged at 5.25%, the Monetary Policy Committee (MPC) tried to suppress market expectations that the bank will quickly follow the Fed and ECB to cut interest rates. The MPC said members in the unchanged interest rates or interest rate hikes in the decision again “very balanced”. BOE governor Bailey said that inflation to return to the target level “there is still a way to go”, the UK and the US, there are differences in the situation, it is too early to speculate on rate cuts. In light of this, UniCredit still expects the BOE rate cut to begin in Q3 2024, a quarter later than the Fed and ECB's cuts, reflecting the stickiness of higher UK wage growth and services inflation. But with the UK economy likely to enter recession in the coming quarters and inflation clearly set to fall to 2% next year, the risks to the BOE's rate cut forecast tend to be that it will start earlier.

02

UBS

【UBS: Do not believe inflation can be controlled】

UBS CEO Sergio Ermotti said he does not believe inflation is under control; the trend of falling inflation looks positive, but it remains to be seen if it can continue; if inflation in all major economies is moving closer to the 2% target, the central bank's monetary policy may ease slightly; in the current situation, it is even more important to remain vigilant.

03

Goldman Sachs

【Goldman Sachs: Lowering Brent crude oil price expectation, and OPEC partial production reduction will be extended until 2025】

Goldman Sachs lowered its 2024 Brent crude price forecast range by $10 to $70-$90 per barrel. This is because only modest shortages are now expected and the long-term price rise will be slightly lower. The 36-month Brent oil price forecast, which is not dictated by OPEC, was lowered by $2 to $72 per barrel in light of increased idle capacity and declining cost inflation. Brent crude oil prices are projected to rise to $85per barrel by June 2024 and average $81 and $80 per barrel in 2024 and 2025. The OPEC+ production cuts announced in April 2023 (1.7 million barrels per day) are expected to be fully extended through 2025, with additional production cuts of 2.2 million barrels per day extended through the second quarter of 2024.